Liontrust GF Sustainable Future Multi-Asset Global Fund

Key takeaways

• Equity markets ended the year on a positive note, delivering a third consecutive year of strong global returns. Performance was driven by capital investment in AI infrastructure, which again proved a key engine of growth for the global economy.
• Alphabet led performance on strong results and AI momentum, while our healthcare overweight also contributed, with Thermo Fisher and Intuitive Surgical among the top performers.
• In Q4, we added Mastercard, Cintas, Monolithic Power Systems and Progressive; exited ASM International, Morningstar and Bright Horizons.
• Broader economic growth should drive a widening of market leadership, with falling interest rates and stabilising momentum supporting improved performance from small- and mid-cap stocks.
• We remain constructive on the outlook for corporate bonds going into 2026, with returns likely to be driven predominantly by carry rather than further material spread compression.

Performance

The Fund returned 0.9% over the quarter, versus 1.7% from its comparator benchmark, a blend of 50% MSCI World, 35% Markit iBoxx EUR Overall and 15% ESTER*.    

Commentary

Equity markets finished the year positively, delivering a third consecutive year of strong global equity market returns. The driver over the year was capital investment in AI infrastructure, and this was again the key driver for growth within the global economy. 

AI infrastructure and semiconductors again led equity markets over the quarter. Leadership within the sector shifted, with memory stocks, particularly in Asia, seeing a sharp improvement. Growing demand from AI data centres pushed memory pricing higher, broadening performance beyond the pure AI plays to a wider group of semiconductor names. We also saw a shift in terms of leadership amongst the Magnificent 7, as Alphabet began to sell its own chips, creating competition for Nvidia’s GPU chips with the AI sector. Alphabet’s Gemini updated 3.0 model was also launched, which is proving itself to be the most sophisticated of the LLMs on the market. This has begun to challenge the leadership of both OpenAI and Nvidia.

Another area of the market that continued its strong performance into the final quarter was banks. The steepening yield curve over the year has been a major tailwind for banks, given that their profit margins are driven by the shape of the yield curve. Short-term rates have fallen as central banks have cut rates, with inflationary pressures abating and a weakening labour market supporting lower rates. At the same time, fiscal pressures on governments across the world have intensified, pushing long-term rates higher. This continued into the fourth quarter, with banks among the strongest areas of the market.

Mining was a standout sector in the last quarter of 2025. Gold has been a consistently strong performer, but strength broadened to other metals, with copper particularly strong. The broader momentum has been driven by a weaker US dollar, supply shortages following years of underinvestment in capacity, and incremental demand from areas of the new economy such as AI data centres.

Healthcare also performed well, as the sector’s turnaround, which began in the third quarter, continued through year-end. Demand across the global healthcare system continues to normalise after two years of destocking following the Covid pandemic. Political pressure in the US also eased, as several large pharmaceutical companies signed deals to build capacity within the US.

One area of the market that continues to disappoint is the consumer. Labour markets have weakened sequentially over the year and, despite some wage growth, costs continue to rise. This has compounded the cost-of-living squeeze, leaving many middle-class Western families still struggling to make ends meet. We saw this across the consumer discretionary sector, where conditions deteriorated further as 2025 progressed.

Portfolio review

The top performer for the period was Alphabet (+29%). Held under our Providing education theme, Alphabet delivered a strong quarterly update, reporting revenue of approximately $102.4 billion, up around 16% year-on-year. The company also unveiled new AI software and announced additional AI-focused partnerships, including a chip collaboration with Anthropic, which helped reinforce confidence in its competitive positioning versus ChatGPT and other rivals. Encouragingly, demand is rising for Google’s specialised AI chips, which are emerging as one of the few credible alternatives to Nvidia’s dominant offering.

Japanese semiconductor test-equipment maker Advantest (+26%) raised its full-year operating profit forecast as demand tied to AI-related chip production continued to accelerate. The upgrade reflects a broader increase in testing requirements, driven by data-centre expansion, generative AI workloads, and rising chip complexity.

For the fiscal year ending March 2026, Advantest now expects operating profit of around ¥374 billion ($2.5 billion) – approximately 25% above its prior forecast. The company also delivered a strong July–September quarter, with operating profit up 71% year-on-year.

The Fund’s long-standing overweight to healthcare was a positive contributor as the sector showed initial signs of a recovery from a challenging post-Covid period. Thermo Fisher Scientific (+20%) and Intuitive Surgical (+27%), both held within our Enabling Innovation in healthcare theme, were among the period’s top performers.

Thermo Fisher, a provider of scientific instruments, consumables, software and services, beat market expectations in the third quarter of 2025, supported by technology partnerships and the launch of new diagnostic products.

Thermo Fisher delivered $11.1 billion of revenue (+5% YoY) and adjusted EPS of $5.79 (+10% YoY). Performance was supported by momentum in new diagnostic tests, particularly in oncology and neurodegenerative disease, alongside contributions from recent acquisitions that broadened the group’s capabilities. The company also highlighted its collaboration with OpenAI, signalling a greater focus on using AI to improve productivity and accelerate innovation.

Intuitive Surgical, the global leader in robotic surgery, beat expectations in the third quarter, delivering adjusted earnings-per-share of $2.40 and revenue of $2.5 billion (+23% yoy). The company also raised its full-year outlook, guiding to da Vinci procedure growth of 17%–17.5% and a gross margin of 67.0%–67.5%, both above prior ranges. Management attributed the revenue strength to higher procedure volumes, increased da Vinci system placements, and a growing installed base.

Leading the detractors, Spotify’s (-17%) shares fell despite a solid Q3 beat, as fourth-quarter guidance disappointed. The Swedish audio platform reported €4.3 billion of revenue (+12% YoY), ahead of consensus, while monthly active users rose to 713 million, also above expectations. However, Spotify guided to €4.5 billion of Q4 revenue, below forecasts, citing currency headwinds. Investor sentiment was further weighed by ongoing pressure on content costs, with recent renewals of major label licensing agreements adding to the expense base.

Trex (-32%) shares fell after the composite wood decking specialist reported underwhelming Q3 earnings and cut guidance for 2025 and 2026. Management lowered its Q4 outlook, citing continued weakness in repair-and-remodel demand and expected distributor destocking. Full-year revenue guidance was reduced to $1.15-$1.16 billion (from $1.21-$1.23 billion), and the company flagged a 250 basis point gross margin decline in 2026.

We sold our position in Trex due to concerns that fundamentals are deteriorating as competitive pressures in the decking industry intensify, while the end market remains challenged. Without an imminent rebound in the Repair & Remodel construction cycle, we believe Trex is likely to struggle to deliver meaningful revenue or earnings growth over the next two years, and we therefore reallocated capital to more attractive opportunities.

Security software specialist Zscaler (-25%) delivered a solid fiscal Q1 2026 update, beating expectations and raising full-year guidance, but the shares fell as the results failed to exceed elevated investor expectations. Revenue and recurring revenues both grew strongly year-on-year, reflecting continued demand for its cloud security platform. However, the market focused on ongoing profitability pressures, including a small net loss and a modest decline in gross margin, which weighed on sentiment. 

Fixed income review

Throughout the fourth quarter, we maintained a strategic long duration position, implemented exclusively through UK gilts. This contributed positively to performance as UK 10-year gilt yields fell around 20 basis points over this period. Gilts had generally traded in a 4.40-4.80% range over the course of 2025, but performed strongly in Q4 as fears around the Budget were reduced after the Chancellor left more headroom than anticipated. Economic data was also generally lacklustre, raising expectations of MPC rate cuts and allowing gilts to rally.

Credit markets remained resilient through Q4, despite occasional pressure from political and fiscal uncertainty. Supportive technical conditions, strong corporate fundamentals, and low global default expectations helped keep spreads contained. The sterling corporate index ended the year just below 80, around 5 basis points from its historical low.

Our underweight position in spread duration meant credit slightly detracted from returns as spreads tightened further during the quarter. Security selection modestly detracted from performance, driven primarily by positions in Utilities, Banks, and Financial Services. This was partly attributable to volatility in our position in Orsted, and also from outperformance in uninvestible names like EDF and Southern Water.

European corporates also saw a small grind tighter in spreads over the quarter, ending 2025 at a similar spread level to their UK counterparts. However, the total return from European bonds was lower over the period, so our allocation to the asset class detracted from returns in Q4.

Asset allocation

We made changes to our asset allocation in December following another strong year for risk assets in 2025. We entered the quarter with a sizeable overweight to both UK and global equities, a position we had held since June. We believe economic momentum remains supportive for equities, reinforced by easing monetary and fiscal policy. However, the growing importance of AI infrastructure investment to market performance increases the risk of disappointment in early 2026. As a result, we reduced our overweight to both global and UK equities.

We redeployed the proceeds by moving the UK credit portfolio to a modest overweight. In our view, weak economic growth is already priced in, while inflation and interest rates are likely to fall through 2026. We also modestly reduced our underweight positions in cash and gilts, which both remain underweight.

Trading activity

We initiated a position in Mastercard, one of the world’s largest payment solutions companies, supporting transactions for around 150 million merchants globally, with 3.6 billion Mastercard-branded cards in circulation. The company’s Value-Added Services segment has grown to roughly 40% of total revenues, with a meaningful proportion tied to enhancing online security. This aligns strongly with our Enhancing digital security theme, given Mastercard’s unparalleled visibility into transaction data and fraud patterns. We believe the company can continue to deliver defensive, dependable double-digit revenue and earnings growth over the next five years and beyond, and it is currently trading below its long-run average valuation, as market attention has been heavily skewed toward AI-exposed opportunities.

We started a position in Cintas, the leading US provider of uniform rental, operating at more than three times the scale of its nearest competitor and benefiting from a clear cost advantage. Cintas has built a reputation for reliability and high-quality service, enabling it to deepen customer relationships and expand into adjacencies such as facilities services and safety solutions. The core uniform rental model is a strong fit with our Delivering a circular materials economy theme, given the reuse and lifecycle management embedded in the service. We view Cintas as a high-quality, dependable growth compounder, and we added exposure following a valuation derating driven by market concerns around the labour environment and AI-related disruption.

We initiated a position in Monolithic Power Systems (MPS), a designer of highly energy-efficient power semiconductors that help reduce electrical losses from source to end use. The company has a strong track record of winning new customers and design sockets through superior efficiency, sophisticated technology, and a collaborative design process that supports faster time-to-market. AI data centres have been a significant driver of recent growth, with MPS products supporting both AI accelerators and memory applications, and we expect this demand to persist. In addition, we see a clear medium-term growth runway in automotive, driven by increased power content in ADAS and new semiconductor sockets linked to vehicle electrification.

Finally, we purchased Progressive, a market-leading US provider of insurance products, helping ensure individuals and businesses can cover costs associated with accidents, injury, and damage. While the name originally reflected the founders’ belief in taking a more innovative approach, we believe this still holds true nearly 100 years later – particularly in the company’s focus on technology, operating discipline, and employee management. Progressive has consistently outperformed the industry in returns on capital and growth, and its higher level of digital sophistication should allow it to continue capturing scale benefits and widening its competitive edge relative to peers.

With regards to exits, we sold our position in ASM International on competition for capital grounds, as we continue to ensure our semiconductor exposure remains aligned with where capital is being channelled within the industry, particularly towards the buildout of AI infrastructure. In this context, we prioritised redeploying capital into areas with clearer alignment to our highest-conviction opportunities.

We exited our position in Morningstar on signs of deteriorating fundamentals, exacerbated by the emergence of a potentially disruptive AI competitor following the launch of “Claude AI for Financial Services.” While we expect several of Morningstar’s market-leading franchises to retain strong positions, we are increasingly concerned about the potential impact on pricing power and margins as competitive intensity rises. Following engagement with the company, we were disappointed by the strength and urgency of its response to these emerging threats, which reinforced our decision to sell.

We sold our holding in Bright Horizons as the core childcare business appears to have plateaued in enrolment growth, limiting improvements in occupancy. Around 50% of centres remain below the ~70% occupancy achieved pre-Covid, and we believe the path to recovery will be gradual given the company’s centre footprint is not optimally positioned for hybrid working patterns, with childcare demand increasingly shifting closer to home rather than workplaces. As a result, the investment case has become more dependent on the continued outsized success of back-up care, and we are less confident in the durability of that growth profile going forward despite recent strength.

Outlook

We expect market leadership to broaden over 2026, having been unusually narrow in recent years and driven by a handful of mega-cap technology stocks. We have also seen growing competition within the AI space, which should support a broader leadership profile. As the funding source for AI shifts beyond the balance sheets of the hyperscalers and becomes increasingly reliant on debt, we expect pressure to build to translate the technology’s enormous potential into economy-wide improvements in returns on investment.

We also expect economic momentum to broaden, with more sectors benefiting from looser monetary policy globally. This should, in turn, support small- and mid-cap stocks, which have struggled as the wider economy has weakened. We expect the broadening to extend to areas such as housing and non-residential construction, which have found it difficult to emerge from a multi-year downtrend driven by higher rates. We take encouragement from the recent turnaround in the healthcare sector, which we believe could be replicated across parts of the construction sector.

Overall, we expect broader economic growth to drive a broadening in stock market leadership. We also expect small- and mid-cap stocks to perform much better as interest rates continue to fall and economic momentum stabilises.

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

*Source: FE Analytics, as at 31.12.25, 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.