Liontrust GF Global Alpha Long Short Fund

Key highlights

• Leadership diverged sharply by region: US markets lagged while Europe and Asia Pacific extended their strength, leaving the MSCI World Index up 0.8% (US dollars).
• While the S&P 500 fell 0.8%, the equal weight S&P 500 rose 3.5%, reflecting an ongoing rotation away from US mega cap growth and toward smaller and more value oriented stocks.
• AI “disruption risk” became a dominant narrative driver, triggering sharp selloffs in parts of software, data and other service-heavy industries perceived as vulnerable to agentic AI workflows, while investors rotated into more asset heavy and “disruption insulated” areas of the market.
• Commodities remained supportive of real asset leadership; oil built on January’s rebound amid Middle East risk premia, while gold resumed its strong uptrend – helping underpin the materials sector after January’s extreme volatility. 

Performance

The Liontrust GF Global Alpha Long Short Fund returned -3.0% in US dollar terms in February, compared with the 0.3% return of the Secured Overnight Financing Rate reference benchmark and the 0.8% return of the HFRX Equity Hedge (USD) Index, also a reference benchmark.  

Source: FE Analytics, as at 28.02.26, total return, net of fees and income reinvested.

Commentary

Market backdrop

February continued the broadening process that began late in 2025 and accelerated in January – but with a clear shift in regional leadership. Global equities rose modestly, with non‑US markets doing most of the heavy lifting as the US mega‑cap complex remained a drag on returns. This divergence was visible in style performance: value outperformed growth amid investor preference for nearer‑term cash flows and more moderate valuations. 

In the US, the S&P 500 declined 0.8% (US dollars) during the month, but the underlying tape was far stronger than the index suggested. The equal‑weight S&P 500 gained 3.5%, and small caps were positive, highlighting that February was less about “risk‑off” and more about rotation and dispersion. Sector performance reinforced that message: utilities, energy, materials, consumer staples and industrials led, while technology and other growth-heavy sectors lagged as investors reassessed valuation assumptions embedded in prior winners. As a result, style and sector dispersion remained extreme: value outperformed growth (value up 2.9% vs. growth down 1.6% globally in US dollar terms), while defensives and real‑asset sectors led.

A key catalyst for this rotation was the market’s evolving view of AI’s second‑order effects. Product updates and rapid progress in agentic AI workflows sparked a “shoot first” reaction across industries perceived as exposed to disintermediation risk – particularly software and adjacent service models – while sectors seen as more insulated (asset‑heavy, regulated, or infrastructure‑linked) attracted incremental capital. For equity long/short managers, this type of thematic repricing typically increases dispersion and creates more fertile ground for differentiated positioning across winners and losers within the same broad theme. 

Macro and policy also contributed to cross‑asset moves. Government bonds posted positive returns as yields declined, and the US dollar strengthened versus January amid renewed trade/tariff uncertainty and shifting central bank expectations. On the policy front, the Federal Reserve did not meet in February, but February brought renewed focus on the January decision to hold rates at 3.50–3.75%, including the release of January meeting minutes and ongoing debate over the future path of easing. 

Commodities remained a notable driver of equity factor leadership. Oil prices rose again on geopolitics and supply risk premia, supporting energy equities. Meanwhile, precious metals rebounded sharply following January’s extreme late‑month dislocation, proving helpful for the materials sector and consistent with continued investor demand for hedges amid policy and geopolitical uncertainty.

Portfolio review

The month was characterised by extreme dispersion beneath the headline indices, with a continued rotation away from US mega‑cap growth and into value/defensives and real‑asset sectors. While this regime created opportunity on the short side in several valuation‑sensitive growth names and cushioned the drawdown, it was not enough to offset the long book, where weakness in a handful of growth/platform names and consumer‑linked cyclicals proved a meaningful headwind. 

Basket Winners:

• Risk diversifiers (materials): February’s renewed bid for real assets and defensives, with gold and precious metals regaining strength after January’s volatility, was supportive for miners and materials-linked exposures.
• AI software: the book benefited via short positioning in multiple software/AI-enabler names, while select longs (notably Microsoft/Atlassian) detracted as the broader software complex de‑rated.
• Defence spending strategy: In a month where markets preferred durable earnings and “real economy” exposures, defence names continued to provide resilience and idiosyncratic upside.

Basket Losers:

• Consumer: a very mixed bag over the month where positive contributions from the short book as well as from our long position in ASICS was more than offset by weakness in Expedia and AUTO1, both hit by the AI-related software scare.
• Storage: A short position squeeze was enough to offset positive gains from the long book.
• Healthcare: a broad de-rating across the sector dragged on the long names such as Omnicell and Intuitive Surgical and outweighed the benefit from the short book.

Portfolio changes

February’s portfolio activity was deliberately high‑conviction and risk‑aware, reflecting the month’s sharp rotation away from premium growth and heightened sensitivity to AI‑disruption narratives. 

Changes focused on three objectives: (1) reducing squeeze/valuation risk in crowded areas; (2) reallocating exposure toward clearer “infrastructure winners” and selective quality compounders; and (3) adding targeted shorts/positions in business models increasingly exposed to AI-led disintermediation.

Key changes

AI Software: February was a month in which markets aggressively repriced disruption risk across software. We exited a number of positions on both the long and short side and re‑allocated toward names we believe have a stronger durability profile. These included ServiceNow, which is a higher‑quality, embedded enterprise platform with more defensible workflows and stronger pricing power, and Amadeus which is a scaled, mission‑critical travel infrastructure platform rather than higher‑multiple, more disruption‑exposed software-as-a-service.

AI Infrastructure/Semis: We reduced exposure to high‑beta, squeeze‑prone infrastructure proxies and rebalanced toward core scalable infrastructure beneficiaries by adding Marvell and Taiwan Semiconductor, where structural demand remains strong but positioning risk is better controlled.

“AI at Risk”: We built a new short basket of AI‑exposed business models designed to express the view that agentic AI workflows increasingly threaten business models reliant on information distribution, data aggregation, and repeatable white‑collar processes. We view this as a more targeted way to monetise the AI‑disruption theme than broad software shorts.

Industrials & Japan: We added to both baskets through ‘real economy’ compounders. This shift reflects a preference for asset‑heavy industrial exposure and companies positioned for capex, electrification and re‑industrialisation tailwinds, consistent with February’s market leadership in cyclicals/real assets.

Outlook

We remain constructive but balanced as we move through early 2026. February largely reinforced the evolving market regime we highlighted in January: global equities advanced modestly but returns continued to broaden away from US mega‑caps, with Europe and Asia outperforming while US indices lagged. Importantly, the headline US weakness again masked stronger underlying breadth, with value and equal‑weight leadership persisting.

Where February added nuance was in the market’s interpretation of AI. A renewed wave of AI “disruption risk” drove sharp selloffs across parts of software and service-heavy models perceived as exposed, while capital rotated toward asset‑heavy sectors viewed as more insulated from disintermediation.

Risks persist – policy divergence, geopolitics, and valuation sensitivity within pockets of growth – but February’s continued breadth, dispersion and factor rotation reinforces our view that 2026 should remain a favourable environment for active long/short stock selection. Our positioning changes – de‑risking premium software, tightening squeeze exposure, adding targeted AI‑disruption shorts (“AI at Risk”), and reinforcing real‑asset and industrial cyclicals – are intended to improve resilience while keeping us exposed to the most durable multi‑year themes.

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

Source: FE Analytics, as at 31.12.25, 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.