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Liontrust Special Situations - looking for companies with an edge

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
  • Anthony Cross and Julian Fosh invest in companies with an advantage over the competition
  • Recent performance was boosted by a number of takeovers
  • We rate the managers but think the ongoing charge is too high

Our view

Anthony Cross and Julian Fosh, managers of the Liontrust Special Situations fund, look for companies that make plenty of cash and have an edge over the competition. They've followed the same robust investment process since the fund's launch in November 2005.

A focus on high-quality companies means the fund's tended to hold up a bit better when the going gets tough, although we'd expect it to lag slightly when markets rise. The managers invest in a relatively small number of companies, which means each one can have a significant impact on returns, although this is a higher-risk approach.

We rate Anthony Cross and Julian Fosh highly and think this fund is a reasonable choice for exposure to the UK stock market. But there are lots of talented fund managers investing in the UK and many of their funds are available at lower cost. That's why it doesn’t currently feature on the Wealth 50 list of our favourite funds.

How's the fund invested?

The managers invest in companies of any size – from big UK businesses that sell their products across the globe, to smaller companies with plenty of growth potential, although they're higher risk.

Importantly, they must have an 'economic advantage' over the competition. That could include intellectual property (like brands and patents), a distribution network, recurring income or a combination of the three. They often have other strengths too like a great culture, or strong customer relationships.

Company in Focus: RWS

RWS helps businesses and individuals file patents and is a market leader in its industry. One of the company's key strengths is its intellectual property. Its employees have developed years' worth of scientific knowledge, across a number of different languages. It's got a great distribution network too, spanning the UK, Europe, the US and Asia. Around half of the top 20 patent filers worldwide are customers.

The company's shares have been held in the fund since launch more than 13 years ago and they've since risen more than 950% although past performance isn’t a guide to the future.

How's the fund performed?

The fund's done well over the long run. An investment of £10,000 made 10 years ago would be worth £53,592*. The broader UK stock market would've returned £28,682. We put this down to the managers' ability to invest in companies with outstanding prospects, regardless of their size or what sector they're in.

Annual percentage growth
Mar 14 -
Mar 15
Mar 15 -
Mar 16
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Liontrust Special Situations 8.2% 4.7% 23.0% 7.2% 8.9%
FTSE All-Share 6.6% -3.9% 22.0% 1.2% 6.4%

Past performance is not a guide to the future. Source: Lipper IM* to 31/3/2019

Performance over the past year was impressive too. The fund grew 8.9%, that's 2.5% higher than the return of the broader UK stock market. Past performance isn’t a guide to the future though.

Success stories include cloud-based communications provider Gamma. It saw strong demand for its products and services across the UK and its acquisition of Netherlands-based competitor Dean One fuelled hopes of further expansion into Europe.

Investments in financial trading firms NEX Group and Fidessa, and pharmaceutical company Shire also did well when they were taken over by competitors.

Please note the fund has a holding in Hargreaves Lansdown.

Find out more about this fund including charges

Liontrust Special Situations Key Investor Information

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.

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