Six Elite Rated funds and how they do things differently
When you are thinking about investing in a fund, it’s always important to know exactly what it does...
Liontrust Sustainable Future Global Growth
Liontrust Sustainable Future Global Growth fund invests in the shares of a broad range of companies from around the world, based on the fund manager's view of their long term return prospects. The fund uses a thematic approach to identify the key structural growth trends that will shape the global economy of the future across a portfolio of 40-60 stocks.
Our opinion
A real alternative for investors in what is a hugely competitive global sector. Liontrust Sustainable Future Global Growth fund has produced excellent returns in the past two decades by sticking to its rigorous approach to sustainability and the strength of company management. The result is an extremely flexible portfolio that can – and has – tapped into a number of emerging sustainable themes to garner strong returns over time.
Company description
Liontrust Asset Management was founded in London in 1995 and prides itself on the freedom it allows its managers, who invest in their own portfolios. Listed on the Stock Exchange since 1999, the company's culture is at the forefront of its values. The firm was awarded the Elite Provider for Equities Rating in 2015, 2016, 2019 and 2021.
Fund manager
The sustainable team at Liontrust is one of the largest in the UK, managing some £6.6bn of assets with a 13-strong team across equities and fixed interest. This fund is managed by Peter Michaelis, Simon Clements and Chris Foster.
Peter transferred to Liontrust in April 2017 and heads the sustainable investment team. Prior to this he was head of investment at Alliance Trust Investments. In 2001, he joined Aviva Investors, where he was promoted to head of sustainable and responsible investment in 2005. Themes he specialises in include improving the efficiency of energy use and digital security. He holds an MA in Physics from Oxford University, an MSc in Energy & Environmental Engineering and a PhD in Environmental Economics.
Simon has worked in fund management since 1998. Before joining Alliance Trust Investments in August 2012, he spent 12 years at Aviva Investors (previously Morley Fund Management) where, most recently, he was head of global equities. Themes he covers at Liontrust include improvement of water management, as well as industrial and agricultural processes.
Chris became co-manager in March 2020. He joined the firm in 2013 as an investment analyst responsible for research into financial themes and stocks.
Change is both non-linear and tends to happen very quickly: once a better, cheaper alternative is found, it displaces the incumbent rapidly.
Peter MichaelisFund manager
Investment process
Every investment in the Sustainable Future fund’s range has to meet four set criteria: thematic drivers, sustainable credentials, good fundamentals and attractive valuation.
The investment process begins with a thematic analysis designed to uncover emerging trends and long-term structural growth themes. The investment process begins with a thematic analysis designed to uncover emerging trends and long-term structural growth themes. These range from the development of personalised medicine to the transition to lower carbon fossil fuels. The team believes many of these outcomes have been delivered by the power of capitalism and the creativity of businesses generating profit growth and investment returns.
Three mega trends have been identified, with strong and dependable growth prospects. These are: better resource efficiency (cleaner), improved health (healthier), and greater safety and resilience (safer). Within these three buckets the team has identified 20 areas of predictable and resilient growth.
The team then undertakes a sustainability analysis for each company and also determines the key environmental, social and governance (ESG) factors that are important indicators of future success. The team then assesses how well these are managed through its proprietary sustainability matrix – which allows the managers to rank a company based on its sustainability processes and the quality of its management.
The third stage covers fundamentals, with the team ensuring the companies it invests in have robust business fundamentals with proven ability to deliver high returns on equity through sustaining margins and asset turnover.
The final stage is valuation. The team likes to integrate its view of quality into these businesses, predicting the likely sales, earnings and other financial returns it expects to see from these companies over the next three to five years.
ESG
ESG - Explicit
ESG is a primary feature of Liontrust’s investment strategy on this fund and the managers have built sustainability into the stock selection process through three main stages: Thematic analysis, ESG analysis and Company Engagement.
Thematic analysis is the starting point for idea generation and all companies must be aligned with at least one of three themes: better resource efficiency (cleaner), improved health (healthier) and greater safety and resilience (safer), and 21 themes within these. Sustainability analysis assesses the whole company in two dimensions – the set of products or services offered; and the management of ESG exposures relevant to that industry sub-sector. This uses sustainability to identify companies with better growth prospects and higher quality management. The team places great importance on company engagement, believing it gives greater insight into how businesses are run and helps identify leading companies. It can also be used as a lever to encourage better business practices.
Furthermore, every team member is responsible for all aspects of ESG and financial analysis relating to each investment decision.
Risk
Liontrust Sustainable Future Global Growth fund is almost entirely invested in equities (90-100%) but can hold up to 10% in cash. The managers have shown a consistent ability to demonstrate alpha and is has been one of the stronger performers in the IA Global Sector in the past decade. A high conviction portfolio of 40-60 stocks, the fund has been slightly more volatile versus its peers in the sector in recent times.
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