Liontrust Special Situations has been one of the most consistent performers in the IA UK All Companies sector since launch in 2005, and a number of fund pickers recently told Trustnet they would still recommend holding the fund, despite recent sizeable outflows.
Over the past year £500m has exited the fund, largely down to a dip in performance during the market rotation into value, which hit the assets of many growth-biased portfolios.
Performance of Liontrust Special Situations over 1yr versus sector and index
Source: FE Analytics
This didn’t worry fund pickers though, who said that the fund remained an ideal ‘one-stop shop’ for multi-cap exposure.
Yet despite these outflows, at £6.3bn in assets under management, the fund is not as nimble as it once was. For investors who are looking for alternatives, experts highlighted several contenders.
Liontrust UK Growth
The first name up is Liontrust UK Growth, which is run by the same FE fundinfo Alpha Manager team as Liontrust Special Situations, Anthony Cross and Julian Fosh.
Emma Wall, head of investment analysis at Hargreaves Lansdown, said that Liontrust UK Growth would be ideal for investors who wanted to tap into the 55 years of combined experience in the management team and liked the Liontrust Special Situations process, but didn’t want as big a small-cap exposure.
Liontrust UK Growth is a FTSE 350 vehicle and has a smaller companies cap of 10%, “but in practice it is usually around 6%”, Wall said.
Like Liontrust Special Situations, Liontrust UK Growth follows the Economic Advantage investment process, which was founded and developed by Fosh and Cross and is now used as Liontrust’s general in-house process.
It seeks out stocks with at least one of three intangible assets: intellectual property, strong distribution channels and recurring business.
The idea is these assets provide barriers to entry, protect margins and reap cash-flow returns in excess of the cost of capital.
Square Mile Investment Consulting & Research noted that because of the fund’s quality bias, it will be less exposed to certain sectors and “so performance should be expected to deviate from the index at times”. But the group added that since 2009 – when Foss and Cross took over – the fund has beaten their expectations.
The fund made a total return of 158.82% over the past decade, beating both the IA UK All Companies sector and FTSE All Share index.
Performance of fund vs sector and benchmark over 10yrs
Source: FE Analytics
The £755m fund has an FE fundinfo Crown rating of four and an ongoing charges figure (OCF) of 0.87%.
Royal London Sustainable Leaders
Next up is Alpha Manager Mike Fox’s Royal London Sustainable Leaders fund.
Liberty Godfrey, fund analyst at interactive investor, recommended this fund as a “core option” for a UK equities portfolio.
She said Fox carefully considers a wide range of ESG issues, balancing the positive and negative factors and investing in the transition towards a more sustainable economy. This means companies whose products and services address major environmental and social changes, while making less than 10% of profits from ‘exclusion sectors’, such as tobacco, armaments, animal fur or nuclear power generation.
This thematic process has led it into names such as data services company Experian, which helps deal with debt among vulnerable groups, investment group Prudential and chemicals firm Croda International.
Godfrey said that the fund allows investors to gain access to the UK market “while being mindful of ESG issues”. The latter has become a larger focus for investors in the past 12 months, according to data from the Investment Association’s (IA) latest Investment Management in the UK report.
Fox has run the £3bn fund since 2013, with co-managers George Crowdy and Sebastien Beguelin joining at the end of the first quarter.
Royal London Sustainable Leaders has made the ninth best total return in the IA UK All Companies sector over the past decade, with the fourth best score for suppressing volatility.
Performance of fund vs sector over 10yrs
Source: FE Analytics
The fund has a Crown Rating of five and an OCF of 0.76%.
BlackRock UK Special Situations
Last up is Roland Arnold’s BlackRock UK Special Situations fund.
Ryan Hughes, head of active portfolios at AJ Bell, said that “there are few like-for-like alternatives” to Liontrust Special Situations, given the multi-cap approach seems to have become less popular in recent years. Yet he said the BlackRock UK Special Situations fund looks interesting, given it is split almost equally between large, mid and small caps.
The small-cap allocation has been a “key driver to long-term returns”, Hughes added, noting the fund’s returns of 167.7% over 10 years means it has outperformed.
Performance of fund vs sector over 10yrs
Source: FE Analytics
The fund’s size is also important for navigating this multi-cap space, Hughes said. At £675m, “rather than £6.3bn, it therefore offers more flexibility to adjust the positioning to the opportunities in the market”.
BlackRock UK Special Situations has a Crown Rating of four and an OCF of 0.92%.