Liontrust GF Sustainable Future US Growth Fund

The Liontrust GF Sustainable Future US Growth Fund returned 11.8% in US dollar terms in Q2, compared with the 11.3% return from the MSCI USA Index (its comparator benchmark).

After a tumultuous end to the first quarter, driven by the fallout from the bout of tariffs unleashed on the world by the Trump administration, the market rebounded strongly and shook off concerns that tariffs would hurt the global economy.

Quarterly performance review

Broadcom (+65%) shares surged during the quarter, driven by sustained investment in AI infrastructure. Broadcom, held under our Improving the efficiency of energy use theme, posted strong Q2 results, with revenue rising 20% year-on-year to $15 billion and net income more than doubling to $4.97 billion, fuelled by robust AI and networking demand. Broadcom is a relatively new addition to the Fund, after being purchased in December 2024, so it is pleasing to see the position contributing positively to performance.

Organ transplant company TransMedics (+99%) almost doubled during the period. Held under our Enabling innovation in healthcare theme, TransMedics had a poor second half of 2024 and there was a large amount of scepticism as to whether the company could reaccelerate revenue growth, exacerbated by a short report released at the start of the year. Its most recent results were impressive: revenues grew 48% year-over-year and net income more than doubled to $26 million in the quarter.

Trupanion (+49%), the pet insurer, delivered strong results, marked by an encouraging uptick in retention – the first sequential improvement in six quarters. This development challenges a core bear thesis that rising premiums would erode customer retention and hinder growth. Additionally, the company reported another quarter of solid free cash flow, further strengthening its balance sheet. This positions Trupanion well to reinvest and support future growth later in the year.
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Among the detractors was Becton Dickinson (-25%), whose products enhance medication management, patient safety, infection prevention, surgical procedures, drug delivery, anaesthesiology care, disease diagnosis, and cellular research. The company is exposed to our theme of Providing affordable healthcare, as its huge scale enables it to provide high quality products at highly competitive prices.

Becton Dickinson’s share price fall confounded us. Revenues missed consensus by 1.5% in the quarter but better than expected operating margins led to a 2% beat to earnings expectations. The big issue we believe was the fact that the company lowered guidance for organic growth the full year, from 4-4.5% to 3-3.5%. There are multiple of headwinds facing the business at present, from weakness in China, National Institutes of Health funding cuts in the US, to tariff headwinds – we think a 1% cut to organic topline growth appears reasonable in this context. The fall leaves the shares on less than 12x forward earning – a 30% discount to the company’s 15- year average. The last time it traded at this multiple was in 2012, there are not many companies you can say that about in the current market environment. Becton Dickinson is a recent addition to the Fund and we are frustrated that we were a few months too early on our entry, but remain confident for the shares to perform well in the coming years from this low base.

Thermo Fisher (-19%) was also among the detractors as the life-science industry continues to be in recovery mode following the post-pandemic issues with inventory, as well as ongoing weakness from China. While many of these issues are beginning to pass, the incremental headwind for its core pharmaceutical and biotechnology customer base from the Most Favoured Nation (MFN) legislation led to a multiple derating over the quarter. Thermo is a high quality business, and we remain confident it can again grow its revenue and earnings, but the market has lost patience with it and the wider Life Science sector. The recovery has certainly taken longer than your fund manager expected.

New positions
 

During the quarter we added two new names to the portfolio and exited one. The first addition was Remitly Global, a $3.5 billion market capitalisation company whose mission is to help migrants around the world make their money go further by reducing fees on remittance. It is a rare case of an investable company that addresses the Sustainable Development Goal 10 – Reduced Inequalities. The World Bank estimated that sending remittances costs an average of 6.6% of the amount sent. Bringing this figure down to 1.6% would save the world’s poorest people up to $16 billion a year. Remitly typically charges less than half what the incumbents
charge and is therefore seeing strong growth, with quarterly active customer growth of 29% in the first quarter of 2025 and amount sent growing 41% year over year. This growth is coming in at attractive incremental margins and as the business continues to scale we believe margins will expand, providing us with a highly attractive expected annual return.

The second new entrant to the portfolio was Ingersoll Rand. Ingersoll Rand is a $36 billion company exposed to our 'improving industrial and agricultural efficiency' theme through the equipment and services it sells to a wide range of end markets. In particular, they are a market leader in air compressors, which make up over 50% of revenues and globally account for 10% or more of electricity usage in the manufacturing sector. 80% of the total cost of ownership is due to the energy consumed during use, this means companies compete on efficiency rather
than price. Approximately 10% of revenues are also exposed to our ‘innovation in healthcare’ theme, where a variety of equipment is sold for pharmaceutical manufacturing, or to be used in medical devices.

A large part of the company’s industrial exposure has experienced several years of depressed investments and so we took the opportunity to acquire shares in the business due to our five year investment horizon at what we felt was an attractive valuation.

To make space for these purchases, we sold our holding in the elevator company Otis, which had been in the Fund since launch.

Discrete years' performance (%) to previous quarter-end**:

*Source: FE Analytics, as at 30.06.25, primary share class (A5), in euros, total return, net of fees and income & interest reinvested. 10 years of discrete data is not available due to the launch date of the fund.