Liontrust UK Focus Fund

The Liontrust UK Focus Fund returned 8.4% over the quarter, versus the 4.4% return from its comparator benchmark, the FTSE All Share Index, and the 7.4% average return from the Investment Association UK All Companies sector, also a comparator benchmark.*

The UK market rose over the quarter, recovering from an initial sell-off triggered by President Trump’s ‘Liberation Day’ announcement. The initial market turbulence eased after a temporary suspension of most tariffs and the announcement of several new trade deals, with the UK the first country to benefit. Market strength was driven by strong performance in industrials such as BAE systems and Rolls-Royce, reflecting optimism around increased defence spending and tariff relief. In contrast, healthcare stocks struggled due to policy proposals by the Trump administration.

From a sector perspective, an underweight exposure to energy and an overweight in industrials contributed the most positively to relative performance. An underweight exposure to financials and telecommunications had the most significant negative impact on relative performance.

Positive stock attribution

The most significant positive contributor to relative performance was an overweight position in Dunelm, the home furnishings retailer. Dunelm had strong Q3 results where revenue came in ahead of expectations.

An underweight position in AstraZeneca, the global pharmaceuticals company, was the second leading contributor to the Fund’s relative returns. The stock declined following US proposals to implement a ‘Most Favoured Nation’ pricing policy, which would force drugmakers to align US prices with the lowest prices charged internationally.

Negative stock attribution

The most significant detractor from relative performance was an overweight position in Thermo Fisher Scientific, the US life sciences and clinical research company. 2025 guidance was lowered because of US-China tariffs and US policy changes.

Not holding Rolls-Royce, the aerospace company, was the second most significant detractor from relative performance. The shares performed strongly due to tariff relief and continued strength in its aerospace division, driven by defence optimism and strong civil aviation demand.

Trading activity

During the quarter we initiated new positions in Trainline and Marshalls.

Trainline is an online rail ticketing platform. It has a leading market position in the UK online market, and online sales are becoming a bigger proportion of ticket sales. They are expanding into Europe where the liberalization of rail networks is allowing multi-operator competition. Political uncertainty has weighed on the shares and created an attractive entry point into a market-leading platform.

Marshalls is a UK manufacturer of landscaping, building and roofing products. While landscaping volumes are down over 30% from their peak and profits are almost 80% down, we believe there is significant recovery potential within the division. The building products division also offers recovery potential, with volumes down around 25%. Meanwhile, the roofing business continues to perform extremely well and is one of the best performing businesses in the industry. We believe that there is huge earnings recovery potential for the business with volumes close to all-time lows and an attractive valuation. 

We trimmed our positions in Verisk and Relx over valuation concerns. 

Outlook

There are several crosscurrents facing global businesses at present – a highly volatile geopolitical and tariff environment, an unusually changeable FX market, supply chain reconfigurations away from a dependence on China, and an uncertain consumer environment. At best this presents a challenging environment for businesses to navigate and one in which we imagine the confidence is not there for businesses to invest.

From a UK consumer perspective where we are well exposed in the portfolio (Greggs, Dunelm, Whitbread predominantly) the outlook is mixed – consumer confidence is weak, despite relatively strong real wage growth, and UK unemployment hit a four year high in June.  Companies are reporting a mixed picture: UK banks see stable credit conditions and value-focused retailers like Greggs, Primark (AB Foods), and B&M have issued cautious updates. The bond market has woken up to the debt burden in both the UK and the US, and in the UK the Labour party looks to now need to go down the route of future tax rises. The consumer balance sheet seems strong, which should provide support to spending when confidence eventually picks up, but on aggregate consumers remain hesitant to convert this to spending.

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:

*Source: Financial Express, as at 30.06.25, primary share class, total return, net of fees and income reinvested.