Liontrust Sustainable Future UK Growth Fund

• The portfolio delivered strong returns despite a turbulent quarter marked by tariff-related market disruption, with support from robust earnings and upbeat guidance across holdings.
• 3i Group, Paragon Banking Group and AJ Bell were among the top performers, while Mobico was among the largest detractors.
• We exited our position in Mobico Group, believing there is now a risk that it lacks sufficient capital.

The Fund returned 8.9%* over the quarter versus the IA UK All Companies sector average of 7.4% and the 2.4% return from the MSCI UK Index (both of which are comparator benchmarks).

It was encouraging to see such positive performance over what was a highly volatile quarter, during which tariff concerns overshadowed the broader macroeconomic picture in April. The subsequent recovery was driven by robust financial results and optimistic outlook statements from many of our portfolio companies.

We believe the UK domestic economy is poised for greater stability and modest growth. Companies exposed to this environment are well positioned to benefit from any return to more typical economic conditions.

The top contributor to performance in Q2 was long-term holding 3i Group (+15%), which saw its shares rise, primarily driven by the continued strong performance of its flagship investment, Action, which delivered 6.9% like-for-like sales growth and opened 111 new stores by late June.

In addition, the private equity company – which invests predominantly in retail, infrastructure, healthcare, technology and industrials – successfully exited its investment in MPM, a premium pet food company, generating a 3.2x return and a 29% internal rate of return – further validating its disciplined investment approach. The combination of high-quality realisations and the consistently strong showing from Action led analysts to upgrade forecasts, reflecting growing market optimism around 3i’s strategy and execution.

Specialist lender Paragon Banking Group (+28%), which is held under our Financing housing theme, delivered a stronger-than-expected first-half performance, with new lending up 11% to £1.38 billion. Mortgage advances rose 25% to £812 million, driven primarily by buy-to-let lending and supported by the accelerated rollout of its digital origination system. While redemptions increased, they remain historically low, and customer retention remains strong.

Net interest margin came in at 313bps, just 1bp lower than the second half of 2024 and above the full-year guidance of ~300bps. Although some margin compression is expected in the remainder of the year, it is likely to be more modest than previously anticipated. As a result, full-year margin guidance has been upgraded to “over 300bps.”

AJ Bell (+28%) shares surged following interim results that exceeded expectations. The investment platform operator, which is held under our Saving for the future theme, reported a profit boost, driven by elevated customer activity amid heightened market volatility in March and April.

The volatility – triggered by US tariff announcements and subsequent market swings – spurred trading, benefiting AJ Bell's transaction-driven revenue. The firm now expects full-year revenue and pre-tax profit to exceed earlier guidance.

Ferguson Enterprises (+30%), the provider of sanitation equipment and infrastructure, water infrastructure equipment, raised its full-year guidance after reporting stronger-than-expected sales in its fiscal third quarter.

The company, which is held under our Building better cities theme, now expects low- to mid-single-digit revenue growth, up from its previous low-single-digit forecast. It also increased its adjusted operating margin guidance to 8.5% - 9%, compared to the prior range of 8.3% - 8.8%. Meanwhile, capital expenditure expectations were lowered to $300 - $350 million, down from $325 - $375 million.

Mobico Group (-52%) – a small holding within the portfolio – was among the detractors, as its shares dropped sharply following the announcement of the sale of its US School Bus division to I Squared Capital for £457 million. The disposal, part of the company’s strategic realignment, was poorly received by investors.

Formerly known as National Express, the transport group also warned of a “significant statutory loss” tied to goodwill impairments, the derecognition of deferred tax assets, and additional onerous contract provisions related to its German operations. The combination of asset disposal and fresh loss guidance weighed heavily on market sentiment. We believe there is now a risk that it lacks sufficient capital, and have therefore taken the decision to exit the position.

Our portfolio remains focused on high-quality, mid-cap growth companies aligned with our sustainable investment themes. Our analysis indicates that these businesses continue to offer compelling long-term growth prospects, yet they are trading at a meaningful discount to their historical valuations. As such, while we are encouraged by the recent period of strong performance, we believe there is considerable further upside.

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

* Source: FE Analytics, as at 30.06.25, total return, net of fees and income reinvested

** Source: FE Analytics, as at 30.06.25, primary share class, total return, net of fees and income reinvested