Emma Wall: Hello and welcome to the Morningstar series, 'Why Should I Invest With You'. I am Emma Wall and I am joined today by Stephen Bailey, Manager of the Liontrust Macro U.K. Growth Fund.
Hi, Stephen.
Stephen Bailey: Hello.
Wall: So normally when we get an equity manager in that chair, I ask them to talk about what's going on in the market and in the macro be it the referendum or politics or any kind of overarching theme and they prefer to turn around and say, on the bottom up, stock picker those things don’t affect me. You however have almost the opposite process don’t you.
Bailey: Absolutely, we are very much the opposite of that. Our process we like to call macro thematic. We're looking at the big critical, social economic trends and issues that are reshaping our world and we then try and select stocks and indeed sectors that are working with that. At the same time we're trying to avoid areas of the market that have very negative macro influences. We feel that’s going to be a bit of a headwind.
Wall: So there is much about what you don’t invest in, not pulling you back is what you do invest in.
Bailey: Absolutely. I think in the sector that well that’s exactly right. Trying to avoid, obviously sectors are going to be underperforming. Obviously, being trying to overweight those sectors where we see the advantages.
Wall: With that in mind, where are you seeing the greatest opportunities and what themes are driving future performance for you.
Bailey: There is a number of sort of themes that sort of work together in the portfolio and currently, our largest sort of singular theme is evolving with specialist financial businesses. But even within that, there is a number of actual themes that come into it, whether it's the liberalization of the pensions industry, how that’s affecting the prospects for the industry or perhaps whether it's the new U.K. banking, challenger bank sector.
We see sort of great advantages owning both businesses, but at the same time, we actually would avoid the incumbent banks. Broadly speaking, right about a third of the portfolio is invested into financial related businesses.
Wall: What about the areas that you are perhaps avoiding because for you thematic just don’t add up.
Bailey: Currently two areas we've avoided now for perhaps the last two or three years. Utilities is one and everyone I think has perceived there is political risk in utilities, despite the election result. We don’t think that risk has actually gone away. And the other area where we see very little opportunity to sort of be exposed to, would be tobacco.
Tobacco as we see some very negative macro influence, not just here in the U.K. obviously, this is international business, where a lot of international market. But particularly in emerging markets, we're starting to see some headwinds starting to sort of build and we would suggest that potentially, you are looking at a value trap.
Wall: Stephen, thank you very much.
Bailey: Thank you.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
