Liontrust GF Global Alpha Long Short Fund

Key highlights

• MSCI ACWI posted its sixth consecutive month of gains in US dollar terms as investor sentiment was partly driven the Fed’s rate cut.
• The US once again led markets, with the S&P and Nasdaq posting their strongest September in 15 years as technology heavyweights once again dominated leadership.
• The long book drove gains, with Seagate Technology, Alphabet and Western Digital among the top contributors; thematically, AI Infrastructure, China and Consumer baskets fared well, offset by Financial Services.

Performance

The Liontrust GF Global Alpha Long Short Fund returned 2.0% in US dollar terms in September, compared with the 0.4% return of the Secured Overnight Financing Rate reference benchmark and the 1.5% return of the HFRX Equity Hedge (USD) Index, also a reference benchmark.  

Commentary

Market backdrop

MSCI ACWI posted its sixth consecutive month of gains in September in US dollar terms. Positive investor sentiment was partly driven by a 25bps cut by the Fed which, whilst largely expected, was heavily influenced by weaker US employment data (and not inflation, which remains sticky).

The US once again led markets, with the S&P and Nasdaq posting their strongest September in 15 years as technology once again dominated leadership. Over Q3, the S&P 500 rose 7.4% (US dollar terms) with the Goldman Sachs AI basket up 15.9% and the Bloomberg Mag 7 index up 17.6%. This masked a more lacklustre performance by the rest of the index, demonstrated by the S&P equal weighted index only returning +4.4% in US dollar terms in the same period.

Markets outside the US also continued to do well with the exception of Europe, which took a pause. China, as measured by the KWEB Internet Index, was up 10.5% and Japan rose 8.4% over the month.  

Geopolitical risks continued to mount during the quarter as well as concerns over rates of growth, interest rates and debt levels in the US economy. This served to feed the continued flight to safe haven assets like gold, which is up 47% in 2025 to date – its best performance in the last 46 years! 

The portfolio’s largest contributors to returns came from the long book, including Seagate Technology (+41% in US dollar terms), Alphabet (+14%), Western Digital (+50%), Rolls Royce (+11%) and Coinbase (+11%). Detractors were unsurprisingly mostly in the short book with a US EV carmaker, a Swiss industrial group and a US hardware manufacturer amongst the largest detractors.

Across themes, the AI Infrastructure book continued to perform strongly, helped by the overall reduction in the short exposure early in the month based on T Scores. The China basket also did well, as did our Consumer basket, where the short positions in a UK online grocery retailer and a US salad bar franchise were the key drivers of performance.

On the negative side, the Financials Services basket dragged as our short positions rallied against us in what felt like a short-term trend reversal. Digitalisation and Mobility baskets also performed less well in the month.

Portfolio changes

We added to our China basket on the long side, replacing Sensetime Group with Alibaba and Baidu. 

In the Consumer basket, we added to our short positions through a US fast food retailer and a US online ticker exchange and re-seller. 

We sold out of Dexcom and Starbucks on the long side; the business strategy implementation was not meeting our expectations, leading to increased risk to our upside price target. Dexcom was in our healthcare basket and was replaced by JD Health, the largest Chinese online healthcare platform by revenue which includes online pharmacy, internet hospital consultations, and health services/ads. With paid user penetration still low, we believe JD Health can expand average revenue per user while lifting returns on capital via asset‑light service layers.

AI Infrastructure net exposure rose as we closed three of our short positions based on a change in T scores which proved timely given subsequent strong performance of these names. 

Overall, gross and net exposure was little changed over the month, ending at 131% and 39% respectively. 

Outlook

The outlook for the rest of 2025 continues to present plenty of opportunities for differentiated and diversified returns in the equity markets. In our view, the path to the best returns will likely continue to lie outside the concentrated Mag7 trade; these stocks now account for 40% of the S&P market capitalisation and this has proved troublesome for active managers bent on finding better alternatives. The evidence of the first nine months of 2025 suggests this is becoming easier. 

At the same time, risks are building around the world – both geopolitical and economic. Much of the US data remains weak, yet headline GDP figures are robust. High levels of AI capital investment are having a meaningful impact at the headline level, but this has little effect on the low-end consumer. 

Given this backdrop, our base case is that equity markets globally remain little changed in the final quarter of the year but that there will be plenty of ways to enhance returns beyond the index level. Key themes include defence spending in Europe; the catch-up trade in Chinese tech/AI versus the US; Japanese digitalisation; and emerging markets equities on US dollar weakness – all providing diversification from the US. 

Within the US, we take the view that the winners of the next 10 years will not be the same as the last decade, with companies that use AI effectively across multiple sectors offering interesting opportunities. Within technology, we remain cautious on the longevity of the AI capex cycle and favour selective names that support the trends in AI rather than the titans that build it. 

The path of the US dollar is a critical component of many investment themes today and we expect it to remain weak on the back of government debt levels and a servicing bill that is now close to the 4% of GDP, seen by many as an exit velocity level. Assuming this to be the case, then any equity investments must be viewed through the lens of a weak dollar and this is perhaps the biggest factor in deciding geographic exposures as well as other adjacent ideas like the continued success of investing in stores of value like gold, gold miners, and crypto. 

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

Source: FE Analytics, as at 30.09.25, total return, net of fees and income reinvested. *The Fund was launched on 24 January 2025 to receive the assets of GAM Star Alpha Technology, which was a sub-fund of GAM Star plc (“the merging fund”), which was very similar to the Fund. Because of the similarities between the merging fund and the Fund, the past performance of GAM Star Alpha Technology C Acc - EUR share class has been used for periods prior to the Fund’s launch date.