Morningstar's Manager Check Up

REAFFIRMED RATINGS: Morningstar's Jonathan Miller explains why analysts positively rate Liontrust UK Special Situations 

Jonathan Miller 7 December, 2017 | 8:42AM
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Jonathan Miller: Welcome to the Morningstar Manager Check-up where we take you through some of the latest fund updates from our research team.

The Liontrust Special Situations fund benefits from a stable management team of Anthony Cross and Julian Fosh, as well as a rigorous process. It hones in on the intangible assets of a company, emphasising intellectual capital, distribution channels, and repeat business. This typically leads to bias in areas such as support services, technology and media.

There’s also small and mid cap exposure, meaning the fund has large active positions that can lead to significant divergence in performance relative to the index and peer group. The approach has tended to better preserve capital when markets fall so there’s a strong risk reward profile. Assets in this fund have increased significantly over the years and currently stand at £3.2 billion. We’re keeping a close eye on the shape of the fund given its size and it retains its Morningstar Analyst Rating of Bronze.

When it comes to smaller companies in the UK, we continue to believe Old Mutual’s fund is a strong offering. Daniel Nickols is an experienced small cap investor, has been manager for more than 13 years and is well-supported by his team of six.

Top-down inputs are integral to the strategy. Nickols will look to ensure that the themes and sector weightings agreed upon by the team are reflected, but the structure of the fund is ultimately dependent on the availability of strong stock ideas. Here he looks for a company’s ability to grow earnings faster than the market, the scope to generate a positive surprise, or the potential to be rerated relative to the market. Having generally navigated market conditions well, including during the Brexit vote, we continue to believe in its potential for strong risk adjusted returns, and the fund holds the top Morningstar Analyst Rating of Gold.

Fund managers Sashi Reddy and David Gait have worked together since 2009 and as managers of the Stewart Investors Indian Subcontinent Fund, are an integral part of the group’s Asia team. The core elements of the process have been in place for over 20 years, and we feel it offers a real strength. There’s a considered bottom-up approach and sustainability is a key ingredient of the process. This takes in sustainable goods and services that have a positive impact on society, responsible finance, and required infrastructure. The end portfolio is all-cap, goes truly away from the index and also invests in Sri Lanka and Bangladesh.

The strategy had been soft closed to new investors but is now open for business again. We feel Stewart Investors has proved its worth over an extended period and is among the leading options in this space, as shown by its Morningstar Analyst Rating of Silver.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Jupiter UK Smaller Companies I GBP Inc2.30 GBP-1.23Rating
Liontrust Special Situations I Inc493.20 GBP-0.99Rating
Stewart Inv Indian Sbctnt Sustnby B GBP530.18 GBP1.25Rating

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK

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