The Liontrust UK Focus Fund returned -3.1% over the quarter, versus the 4.5% return from its comparator benchmark, the FTSE All Share Index, and the 0.2% average return from the Investment Association UK All Companies sector, also a comparator benchmark.*
The UK market increased in the quarter, driven by strong performance from the banks, such as HSBC and Lloyds, as interest rates were expected to remain higher for longer, and defence stocks, such as BAE systems, due to a potential surge in defence spending from European countries. However, the domestic economic outlook remains challenging with continued consumer and business uncertainty post the budget. The return of a Trump presidency has added to this uncertainty. This has led to UK consumer exposed stocks, such as Greggs, Dunelm and Whitbread, underperforming.
From a sector perspective, an underweight exposure to basic materials and an overweight in industrials contributed the most positively to performance. An overweight exposure to consumer discretionary and an underweight in financials had the most significant negative impact on relative performance.
Positive stock attribution
The most significant positive contributor to relative performance was not holding Diageo, the multinational beverages company. Diageo had weak half-year results where their medium-term guidance was removed.
An underweight position in Glencore, the global mining company, was the second leading contributor to the fund’s returns. Glencore provided a disappointing copper production guidance at its full-year results.
Negative stock attribution
The most significant detractor from relative performance was an overweight position in Greggs, the leading UK food-to-go retailer. Greggs reported a slowdown in sales growth in its the full-year results as the business is impacted by a tougher consumer backdrop in the UK and continues to make investments for future growth, which will weigh on near-term margin progression.
An overweight in Rentokil, the pest control company, was the second biggest detractor from performance. Rentokil is in the midst of integrating its largest acquisition to date – Terminix – which has proven to be a complex task. The most recent results showed continued weak sales momentum in North America, but they have adopted a new branch strategy following pilots which should improve performance within North America.
Trading activity
We initiated a new position in MONY Group and Unilever and increased our position in National Grid in the quarter.
MONY Group is one of the leading price-comparison companies. It is a highly cash-generative business, with a large proportion returned to shareholders, and trades at an attractive valuation. The management team is evolving the business model to reduce its reliance on marketing spend for customer acquisition and to keep customers in the ecosystem, which should boost profitability.
Unilever is one of the world’s largest consumer goods companies, boasting a portfolio of strong brands in attractive markets. The company has been undergoing a transformation to become a simpler, more focused and more efficient company. With a highly regarded new CEO at the helm, Unilever is well positioned to deliver strong performance in the years ahead.
National Grid is a leading US and UK regulated utility, playing a critical role in the global energy transition. The company is exposed to the strong structural growth tailwind of electrification as a result of global moves to decarbonise, providing medium-term earnings visibility. We initiated the position following National Grid strengthening its balance sheet through a rights issue and a dividend cut, leaving it better equipped to capitalise on these trends over the medium term.
We exited our position in Fevertree on lowered relative conviction and trimmed positions in 3i and Relx on valuation.
Outlook
The re-election of Donald Trump has increased economic uncertainty. The ‘Liberation’ day tariff announcement proved more severe than the markets had anticipated, triggering sharp selloffs across global equity markets. Tariffs are expected to increase the cost of doing business for companies and will weigh on consumer and corporate confidence. Closer to home, the UK faces its own set of challenges alongside these announcements. The increase in employer National Insurance rates following Labour’s budget will be a direct cost headwind for UK businesses, especially those with high domestic exposure and labour-intensive models. We are assessing the extent to which companies can offset these cost headwinds through efficiency gains and pricing power. Our focus remains on constructing a well-balanced, and diversified portfolio of advantaged businesses. Our confidence in the medium-term outlook for the portfolio comes from the excellent strategic, operational, and financial progress that the vast majority of the companies in the portfolio have made (and continue to make) over the last couple of years. Shorter-term risks remain high across markets.
Discrete years' performance (%) to previous quarter-end:
| Mar-25 | Mar-24 | Mar-23 | Mar-22 | Mar-21 |
Liontrust UK Focus X Acc GBP | 6.2% | 11.9% | 0.5% | -3.5% | 37.9% |
FTSE All Share | 10.5% | 8.4% | 2.9% | 13.0% | 26.7% |
IA UK All Companies | 5.1% | 7.6% | -1.9% | 5.4% | 38.0% |
Quartile | 2 | 1 | 3 | 4 | 2 |
*Source: Financial Express, as at 31.03.25, primary share class, total return, net of fees and income reinvested.
