280. Seven fund managers, just ten minutes, what would you ask them?
In this special bonus episode to mark ‘International Podcast Day’, the focus is on a unique event...
Liontrust Sustainable Future Managed
Liontrust Sustainable Future Managed fund aims to deliver capital growth over the long term (five years or more) through its own sustainable process and by investing in a combination of global equities, bonds and cash. The managers use a thematic approach to identify the key structural growth trends that will shape the global economy of the future, across a 40-60 stock portfolio.
Our opinion
A sustainable multi-asset fund which has proven its ability to outperform in the last two decades – Liontrust Sustainable Future Managed is backed by one of the most experienced and well-resourced teams around. The fund has a well-defined process which has emphatically proven sustainable companies have better growth and are more resilient than the market gives them credit for - having delivered excellent performance through a high conviction portfolio.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 and Simon Clements.
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.
The only real difference between investors is time horizon and we continue to focus on the long-term growth potential of cashflows.
Peter MichaelisFund manager
Investment process
This portfolio can hold 60-85% in equities (this includes 30-60% in global equities ex-UK and 20-45% in UK equities), 0-40% in bonds (up to 25% in corporate bonds and 30% in gilts) and up to 10% in cash.
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. 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. The team specifically target a return in excess of 10% per annum.
On the fixed income side, the managers aim to produce an income yield, with the prospect of some capital growth, by investing predominantly in corporate bonds and by actively managing the interest rate exposure.
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
The majority of risk is derived from stock selection within the portfolio, with asset allocation contributing up to 25% of the risk. The resulting portfolio consists of 40-60 holdings spread across the breadth of the team’s investment themes. Position sizes are determined according to risk, reward and sustainability. The team can – and does – invest in some of its other managed sustainable funds within the portfolio.
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The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.