Liontrust GF Sustainable Future US Growth Fund

The Liontrust GF Sustainable Future US Growth Fund returned 2.9% in US dollar terms in Q3, compared with the 8.0% return from the MSCI USA Index (its comparator benchmark).

It was a difficult quarter for the Fund. There seems to be one topic dominating markets currently; AI. Given our overweight to small and mid-caps, the portfolio is underweight many of those deemed to be AI winners and so the portfolio struggled to keep pace with the index.

Given the broader market’s AI-fuelled gains, it’s no surprise that several of the Fund’s leading contributors this quarter were closely aligned with this theme. Positions such as Alphabet (+41%), KLA Corporation (+21%) and Cadence Design Systems (+13%) all delivered strong returns, benefiting from continued investor enthusiasm and robust earnings updates tied to the ongoing AI adoption and development.

Morningstar (-26%) was one of the largest detractors over the period. The company provides unique and essential datasets to financial market participants and remains well positioned to benefit from the long-term trend toward greater transparency and data-driven decision-making. Although earnings estimates for Morningstar have been steadily upgraded over the past two years, its share price has fallen sharply despite no material change in underlying expectations. This weakness appears driven by investor concerns that advances in large-language models (LLMs) could enable the creation of competing data providers at a fraction of the cost.

We believe this view underestimates Morningstar’s competitive strengths. The company is far more than a “pure data” supplier – its research, analytics, and integration within client workflows create meaningful barriers to entry that cannot easily be replicated by AI systems. While we acknowledge the risks posed by technological disruption, we see Morningstar as well positioned to leverage AI to enhance its products and operational efficiency rather than be displaced by it.

Cava (-30%), a new position in the Fund, reported second-quarter same-restaurant sales that fell short of analysts’ expectations and reduced its full-year outlook, citing softer consumer sentiment. The company posted same-restaurant sales growth of 2.1%, which was below forecasts. Cava operates a rapidly expanding network of Mediterranean restaurant chains across the US, offering fresh and healthy Mediterranean cuisine. The company’s roll out of new stores however is progressing faster than previously expected, so there is no real change to estimates for full year revenue growth and we remain excited about the future prospects for growth.

Trading activity

We sold our position in TransMedics over the quarter. This was driven by a combination of factors that together undermined our conviction in the stock. Competitive pressures from normothermic regional perfusion (NRP) have become more significant than we first anticipated, as its cost advantages represent a greater risk despite ongoing ethical debates and the continued need for the organ care system (OCS). Adding to this, there is the potential for political risk, particularly if US policy were to challenge the cost-plus model for organ transplants, which could expose TransMedics’ revenue model to scrutiny. After a terrible run into the end of 2024 the shares had more than doubled in 2025 and so we took the opportunity to exit the position given our reduced conviction.

In the quarter, we once again became shareholders in the US regional bank based on the East Coast, Hingham Institution for Savings. The bank is a family-run with the current management having been in place since the early 90s. Over this period, they have demonstrated a disciplined approach to lending responsibly and have an impressive track record for compounding shareholder capital. A portion of the banks funding is wholesale, so higher rates in the US in recent years hurt profitability, taking the return on equity from the highs of 23% in 2021, to as low as 5% in 2024. As such the multiple for the shares has fallen significantly and as interest rates have started to fall, profitability is once again expanding. Our expectation is for significant earnings growth and the potential for multiple expansion.

We also purchased Zscaler, a leader in Secure Access Service Edge (SASE) which offer more efficient and secure protection than traditional firewalls. Benefiting from rising cloud adoption, Zscaler processes over 500 billion transactions daily, blocks 150 million+ threats, and delivers 250,000 security updates per day across 160+ data centres. All revenues align with our Enhancing digital security theme. 

We added ServiceTitan under our Enabling SMEs theme; we expand on the thesis below. 

To fund these additions, we exited Winmark and Globant. We sold Winmark for our favourite reason: the share price rose beyond our view of fair value, taking our expected annual return below 5% per annum.

Globant, by contrast, has been a disappointing investment. The company provides outsourced IT services to companies that lack the expertise or resource to undertake IT projects – one of their largest customers is Alphabet, for example. The company’s shares have performed poorly in 2025 for several reasons. First, management repeatedly downgraded growth expectations as demand deteriorated. We had under-appreciated the business’s cyclicality, and management’s inability to predict its trajectory has been disappointing. Second – and decisive for our exit – the advent of AI has challenged the businesses’ long-term moat.  As barriers to writing code continue to fall, demand for Globant’s services and its pricing power are at risk. The position had shrunk below 1% of the Fund, and we chose to exit rather than bring it back up to 1%, reallocating capital to higher-conviction ideas like ServiceTitan. 

ServiceTitan – enabling the trades to thrive in a digital age

At the end of the quarter, we initiated a new position in ServiceTitan, the leading provider of software for tradespeople in the US. The company describes itself as “the operating system that powers the trades”.

ServiceTitan was founded in 2007 by Ara Mahdessian and Vahe Kuzoyan, both sons of Armenian immigrants and tradespeople. The company was designed to solve a problem affecting many tradespeople: their parents, like many others in the trades, were spending their evenings buried in paperwork. Lacking suitable software, the pair built their own. These founders still run the company today and their fathers rang the bell at the IPO – a reminder that the company is still lead by its empathy for customers.

The trades represent a fragmented industry of largely local small and medium-sized enterprises (SMEs), providing essential services such as plumbing, electrical and HVAC services. These services are essential to the construction, maintenance and retrofitting of the built environment. As such, ServiceTitan is exposed to two of our sustainability themes: Enabling SMEs and Building better cities.

The company estimates that they are 10-15% penetrated versus their addressable market, with their main competitor still being Microsoft Excel or even pen and paper in some cases. Due to 80% of the workflows being common across trades, ServiceTitan can efficiently expand from its core residential trades into newer niches such as roofing or pest control, as well as into commercial customers who now make up roughly 25% of customers.

The software is considered mission critical for tradespeople and so customer retention rates are impressive at over 95%. The company went public in December 2024 with the founders retaining a c.10% stake, providing purpose-driven leadership which resonates with both employees and customers alike. 

ServiceTitan’s core proposition is priced on a per technician basis, providing a link between ServiceTitan revenue and customer growth – trade businesses need to hire or acquire more technicians to grow over the long term. We believe that in comparison to other software businesses, this pricing model is more defensible. Due to the efficiencies they provide, ServiceTitan enables businesses to hire less administrative staff as it grows, helping them to focus on hiring frontline, revenue generating technicians. 

We believe the company’s guidance is conservative, particularly on longer-term margins despite formally targeting 25% Non-GAAP operating margins, we see no reason why the company cannot achieve 30-40% over time given their 70% and rising gross margin. 

We expect the company will turn profitable in the next quarter, and we forecast annualised returns of 15% from our in-price on a 5-year view, sitting comfortably above our 10% hurdle rate. This opportunity has been presented by the broader market sell-off in software due to  fears over the impact of AI. Many investors are uncomfortable investing in software companies in the current environment and we agree one must tread carefully, however, we believe that we are still a long way from AI being able to fix your boiler. 

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

*Source: FE Analytics, as at 30.09.25, 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.