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View NowPast performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.
- Markets saw heightened volatility in Q2 2025, largely due to uncertainty surrounding tariff policies and ongoing conflict in the Middle East. Nevertheless, most major asset classes closed the quarter with positive returns.
- Top performers for Q2 included Advantest, Spotify and TransMedics. Becton Dickinson and Thermo Fisher were among the detractors.
- In Q2, we added a position in Ingersoll Rand, while selling our position in TechnoPro.
The Fund returned 5.5% over the quarter, versus the 3.8% return from the IA Flexible Investment sector (comparator benchmark), placing the Fund in the 1st quartile for the period*.
Market review
Markets experienced notable volatility in Q2 2025, driven by uncertainty around tariff policy and conflict in the Middle East. Despite these headwinds, most major asset classes ended the quarter with gains as worst-case scenarios were avoided and underlying economic data remained solid.
The announcement of tariffs on 2nd April, known as “Liberation Day”, triggered a sharp market selloff, with both equities and bonds reacting strongly. However, the US administration quickly moved to ease tensions by pausing tariffs for 90 days and outlining a trade agreement with China. This policy shift helped restore investor confidence, leading to a broad recovery in risk assets.
Mega-cap tech stocks rebounded strongly, supported by renewed optimism and robust earnings. After a weak first quarter, the ‘Magnificent 7’ outperformed significantly. It was pleasing to see the Fund deliver strong relative performance despite an underweight allocation to this group of stocks, which were a key driver to market returns.
Fund performance
The top performer in Q2 was Advantest (+61%), the Japanese manufacturer of semiconductor testing equipment and electronic measuring instruments, whose shares surged on the back of strong financial results and surging demand for AI and high-performance computing (HPC) chips. The company posted a 60.3% increase in revenue to ¥779.7 billion and a 159% rise in net income to ¥161.2 billion, fuelled by a favourable product mix, a weaker yen, and an 80.4% jump in sales from its semiconductor test systems segment as chipmakers accelerated investments in advanced testing solutions. Market sentiment was further boosted by a brokerage target price upgrade, reinforcing investor confidence, even as traders largely shrugged off escalating geopolitical tensions between Israel and Iran.
We were particularly encouraged by Advantest’s strong performance this quarter, following our recent decision to add the company to the portfolio as part of our strategy to increase exposure to the AI theme. We believe the company is well-positioned for continued growth into 2026 and beyond, with its market-leading role in semiconductor testing becoming increasingly valuable as chips grow more complex.
Spotify (+31%) continued its strong performance with its Q1 2025 results reflecting robust user and subscriber growth, with monthly active users (MAUs) rising 10% year-over-year to 678 million and premium subscribers increasing 12% to 268 million. Revenue climbed 15% year-over-year to €4.2 billion. However, both earnings per share (EPS) and total revenue came in slightly below analyst expectations. Despite the shortfall, CEO Daniel Ek underscored the platform’s resilience amid economic uncertainty and highlighted strong user engagement and retention as key strengths supporting long-term momentum.
Medical technology company TransMedics (+88%) rose sharply during the period. Held under our Enabling innovation in healthcare theme, TransMedics had a very poor second half of 2024 and there was a large amount of scepticism as to whether the company could reaccelerate revenue growth. Its most recent results were extremely impressive: revenues grew 48% year-over-year and net income more than doubled to $26 million in the quarter.
Among the detractors was Becton Dickinson (-29%) which fell sharply over the period. This is a c.$60 billion market capitalisation business in the healthcare sector, listed in the United States. The company’s products enhance medication management, patient safety, infection prevention, surgical procedures, drug delivery, anaesthesiology care, disease diagnosis, and cellular research
Becton Dickinson’s share price fall was confounding to us. Revenues missed consensus by 1.5% in the quarter but better than expected operating margins led to a 2% beat to EPS. Organic revenue growth for the full year 2025 was lowered from 4-4.5% to 3-3.5%. There are lots of headwinds facing the business at present, from weakness in China, to National Institutes of Health funding cuts in the US, to tariff headwinds, so we think a 1% cut to organic topline growth isn’t too bad in this context. The fall leaves the shares on less than 12x forward earnings, which for the quality and resilience of the business, is far too low in our opinion. A recent investment in the Fund, 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 (-23%) 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 group.
Trading activity
Over the quarter, we added Ingersoll Rand under our Improving the resource efficiency of industrial and agricultural processes theme. The company sells energy-efficient industrial equipment that are crucial for a wide range of end markets. Compressors are ubiquitous to manufacturing, and uptime of equipment is crucial for efficient industrial processes. Compressors also account for 10% or more of electricity expense in the manufacturing sector, with the opportunity to reduce over 40% of that by identifying inefficiencies in equipment and wider air systems.
With regards to exits, TechnoPro has been a lower-conviction holding over the past 12 months, following an underwhelming meeting with management in Tokyo last June. The core business has faced challenges retaining staff at the margins, as wage increases among Japan’s blue-chip companies have begun luring employees back. Additionally, its acquisition of Robosoft, a fully outsourced IT consulting firm in India, has underperformed amid a broader slowdown in demand for IT consulting services.
We remained patient in identifying an appropriate exit point, and shares surged by 20% last month on rumours that the management team may take the business private. This provided an opportunity to exit the position closer to our long-term valuation target.
Outlook
2024 presented severe headwinds for mid-cap investors, with the asset class facing a challenging backdrop due to macroeconomic uncertainty and shifting market sentiment. However, we believe these headwinds are now beginning to reverse. In our view, small and mid-cap areas of the market continue to offer some of the most compelling long-term investment opportunities, and we believe we are currently positioned at a very attractive entry point.
This conviction is further supported by current valuations, which remain well below historical norms. Many stocks within this cohort are trading at substantial discounts relative to their 20-year averages, offering a favourable risk-reward profile for long-term investors.
The same valuation opportunity is evident within our portfolio. A significant proportion of our holdings are trading at meaningful discounts to their five-year average valuations. This has resulted in an overall portfolio valuation that is materially below its five-year average, despite the fact that our holdings are delivering stronger revenue and earnings growth, alongside significantly higher return on equity (ROE).
As we’ve highlighted on multiple occasions, the primary driver of the portfolio continues to be the global transition toward a more sustainable economy. This structural shift is underpinned by enduring economic, environmental, and societal imperatives that extend well beyond short-term market volatility or political developments—whether in the US or elsewhere.
Discrete years' performance (%) to previous quarter-end:
| Jun-25 | Jun-24 | Jun-23 | Jun-22 | Jun-21 |
Liontrust Sustainable Future Managed Growth 2 Acc | 2.4% | 12.4% | 11.4% | -17.6% | 24.3% |
IA Flexible Investment | 5.0% | 11.8% | 3.3% | -7.1% | 19.5% |
Quartile Ranking | 4 | 3 | 1 | 4 | 2 |
*Source: FE Analytics, as at 30.06.25, primary share class, total return, net of fees and income reinvested.
KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
- All investments will be expected to conform to our social and environmental criteria.
- Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund.
- Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result.
- The creditworthiness of a bond issuer may also affect that bond's value. Bonds that produce a higher level of income usually also carry greater risk as such bond issuers may have difficulty in paying their debts. The value of a bond would be significantly affected if the issuer either refused to pay or was unable to pay.
- The Fund may encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings.
- Outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash.
- Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
DISCLAIMER
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.
It should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets.
This information and analysis is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
Understand common financial words and termsSee our glossary
The Fund aims to maximise total returns (a combination of income and capital growth) over the long term (five years or more) through investment in sustainable securities, primarily consisting of European investment grade fixed income securities. The Fund invests at least 80% of its assets in bonds issued by companies which are denominated in Euro or non-Euro corporate bonds that are hedged back into Euros. The focus is on investment grade corporate bonds (i.e. those which meet a specified level of creditworthiness). The Fund invests in companies that provide or produce more sustainable products and services as well as having a more progressive approach to the management of environmental, social and governance (ESG) issues. Although the focus is on investment grade corporate bonds, the Fund may also invest in government bonds, high yield bonds, cash or assets that can be turned into cash quickly. Where the Fund invests in non-Euro assets, the currency exposure of these investments will generally be hedged back to Euro. Up to 10% of the Fund's currency exposure may not be hedged, i.e. the Fund may be exposed to the risks of investing in another currency for up to 10% of its assets. The Fund may invest both directly, and through the use of derivatives. The use of derivatives may generate market leverage (i.e. where the Fund takes market exposure in excess of the value of its assets). The Fund has both Hedged and Unhedged share classes available. The Hedged share classes use forward foreign exchange contracts to protect returns in the base currency of the Fund.
5 years or more.
3 (Please refer to the Fund KIID for further detail on how this is calculated)
Active
The Fund is considered to be actively managed in reference to IBOXX Euro Corporate All Maturities (the "Benchmark") by virtue of the fact that it uses the benchmark(s) for performance comparison purposes. The benchmark(s) are not used to define the portfolio composition of the Fund and the Fund may be wholly invested in securities which are not constituents of the benchmark.
The Fund is a financial product subject to Article 9 of the Sustainable Finance Disclosure Regulation (SFDR). You can learn more about our implementation of the SFDR here.
KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
- Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund.
- Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result;
- The creditworthiness of a bond issuer may also affect that bond's value. Bonds that produce a higher level of income usually also carry greater risk as such bond issuers (high yield) may have difficulty in paying their debts. The value of a bond would be significantly affected if the issuer either refused to pay or was unable to pay.
- The Fund, may in certain circumstances, invest in derivatives but it is not intended that their use will materially affect volatility. Derivatives are used to protect against currencies, credit and interest rate moves or for investment purposes. The use of derivatives may create leverage or gearing resulting in potentially greater volatility or fluctuations in the net asset value of the Fund. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead.
- Credit Counterparty Risk: outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash.
- Liquidity Risk: the Fund may encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings.
- ESG Risk: there may be limitations to the availability, completeness or accuracy of ESG information from third-party providers, or inconsistencies in the consideration of ESG factors across different third party data providers, given the evolving nature of ESG.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
DISCLAIMER
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.
It should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets.
This information and analysis is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
