Liontrust Global Alpha Fund

Key highlights

• Global equity markets supported by strong corporate earnings, easing geopolitical tensions, and a more accommodative monetary policy stance from major central banks.
• The largest contributors to portfolio performance came from AI beneficiaries such as SK Hynix and Snowflake.
• Two new holdings added during October: Marvell and M3.

Performance

The Liontrust Global Alpha Fund returned 4.7% in sterling terms in October, compared with the 4.8% return of the MSCI ACWI Index comparator benchmark and the 4.0% average return in the IA Global sector (also a comparator benchmark).

Commentary

Market backdrop

Global equity markets continued their upward trajectory in October, supported by strong corporate earnings, easing geopolitical tensions, and a more accommodative monetary policy stance from major central banks. 

Japan performed strongly with the Nikkei 225 up 15% (sterling terms), driven by tech sector strength and supportive government policy. Europe posted more modest gains (STOXX 600 +3.0% in sterling terms) against a difficult backdrop of political uncertainty in France.

In the US, a slightly lower than expected CPI at 3.0% reinforced the Fed’s dovish pivot which accompanied the 25bps rate cut in October. This provided a tailwind for risk assets and, when coupled with strong Q3 earnings growth of 10.7% – led by technology and consumer discretionary sectors – set the scene for the S&P 500 to reach new highs as it delivered the seventh consecutive month of gains. Notable gains came from Nvidia, AMD, Amazon, and Alphabet. Gains were narrowly concentrated in large-cap growth stocks with mid-caps and equal-weight indices lagging. So far, the US government shutdown has largely been shrugged off by investors but remains in the background.

Asian markets overall performed strongly; Japan was the best performing developed market globally, China saw a rebound in technology stocks, aided by domestic stimulus and improving trade relations with the US, while South Korea extended its year-to-date gains to +70% by month end. 

Geopolitics eased somewhat with the ceasefire in Gaza although the Ukraine/Russia appears at an impasse currently.

Portfolio review

The largest contributors to portfolio performance over the month came from AI beneficiaries:

• SK Hynix (+62% in sterling terms), which benefited from surging demand for AI memory chips, particularly HBM3E and DDR5 for servers. The company posted record Q3 profits and announced mass production of HBM4, securing full capacity bookings into 2026. Strategic partnerships with OpenAI and Broadcom further boosted sentiment.
• Snowflake (+25%) and Cloudflare (+21%), which both surged following Q3 results and revenue growth of +32% and +31% year-on-year respectively, driven by enterprise adoption and strong customer retention. Both companies raised full-year guidance.
• Eyewear company, EssilorLuxottica (+16%), achieved its best quarterly performance ever, with 11.7% revenue growth driven by booming wearables (AI glasses), strong sales in vision care and sunglasses, and strategic acquisitions (RetinAI, Optegra). 

Consumer discretionary was another strong sector in October. Shopify (+20%) rose after posting 32% revenue growth and strong free cash flow margins. The company benefited from rising merchant adoption, international expansion, and new AI tools. LVMH (+18%) also returned to positive performance after it surprised the markets with a return to sales growth (+1%) after two quarters of declines. Strong performance in Asia and the US, recovery in wines & spirits, and standout results from Sephora and Fashion & Leather Goods lifted the shares.

Detractors over the month included BayCurrent Consulting (-20%), which fell in early October on what appeared to be profit taking. BAE Systems (-8.5%) also pared gains despite strong half-year results on concerns over production halts at its Typhoon jet line. Alibaba (-2.3%), following a 110% rally to end September, declined slightly in October, driven by some renewed investor caution over China’s regulatory environment and geopolitical risks. Lastly Netflix (-4.4%) fell as it missed earnings due to an unexpected $600 million Brazilian tax dispute resolution. 

Portfolio changes

We added two new positions in October:

• Marvell: Amazon’s Q3 results confirmed strong Trainium 2/3 (custom AI chips) demand which is key for Marvell. Coupled with strong capex guidance from the other hyper scalers over results season, this has given us renewed confidence in Marvell’s ability to exceed current market estimates for growth.
• M3: A leading healthcare platform company offering comprehensive medical-related services primarily to physicians and healthcare professionals via the internet. Growth is structurally driven by the global digitisation of healthcare, and we believe that ongoing investments in AI-enabled platforms, cloud-based services, and international expansion will underpin strong long-term revenue growth. In addition, the company continues to target strategic acquisitions and partnerships, particularly in digital health and clinical trial technology, which should further support enhanced value creation in our view. 

Elsewhere, we pared back some of our China exposures including BYD, Full Truck Alliance and trip.com as year-to-date outperformance had taken our overall positions in China to a more extended weighting. 

We used the proceeds to add to favoured holdings Atlassian, Intuitive Surgical, London Stock Exchange and Paypal.

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: