Name: The Liontrust UK Microcap Fund's investment process
Uploaded: 2023-01-19T19:11:11.693614+00:00
Duration: 1565 s
Channel: Master Investor

For the first stage of its investment process, the Liontrust UK Microcap Fund has defined three attributes that a company needs to demonstrate: intellectual property, distribution, or repeat business. In addition, the fund also values some intangible assets such as a strong brand, strong culture, formats and procedures. Companies also have to be UK-headquartered and cannot be making losses. In the second stage, the fund tests the companies' assets in financial terms. Using the Quest system, a key metric that the fund is looking at includes the cash flow return on capital; companies have to make a return above their cost of capital. In the second stage of its investment process, the fund assesses the companies' valuation, before it decides on its position sizing using a grid of 14 risk measures.

<p>For the first stage of its investment process, the Liontrust UK Microcap Fund has defined three attributes that a company needs to demonstrate: intellectual property, distribution, or repeat business. In addition, the fund also values some intangible assets such as a strong brand, strong culture, formats and procedures. Companies also have to be UK-headquartered and cannot be making losses. In the second stage, the fund tests the companies' assets in financial terms. Using the Quest system, a key metric that the fund is looking at includes the cash flow return on capital; companies have to make a return above their cost of capital. In the second stage of its investment process, the fund assesses the companies' valuation, before it decides on its position sizing using a grid of 14 risk measures.</p>

https://d3ev5earl6dvd0.cloudfront.net/public-media/videos/004/465/004465/video_l9HwBUr.mp4#t=169

Master Investor

The Liontrust UK Microcap Fund's investment process

About Liontrust Asset Management PLC

The Liontrust UK Microcap Fund's investment strategy

The Liontrust UK Microcap Fund's performance

The Liontrust UK Microcap Fund's performance in 2022

Liontrust's microcap fund had a great year in 2021, significantly outperforming its benchmark and gaining 33.6%. Alex Wedge tells Jonathan Davis what they look for in an investment and how the fund maintains a balanced portfolio.

<p>Liontrust's microcap fund had a great year in 2021, significantly outperforming its benchmark and gaining 33.6%. Alex Wedge tells Jonathan Davis what they look for in an investment and how the fund maintains a balanced portfolio.</p>

https://d3ev5earl6dvd0.cloudfront.net/public-media/videos/004/465/004465/video_l9HwBUr.mp4

John Davis interviews Alex Wedge, Fund Manager at Liontrust Asset Management PLC. Liontrust Asset Management PLC launched the Liontrust UK Microcap Fund in 2016. The fund has won the UK Small Cap Award in 2022.

The Liontrust UK Microcap Fund specialises in the smallest companies on the UK market, with a market cap below £175 million. Around 90% of these companies are listed on AIM, which primarily results from the fund's particular focus on owner manager businesses.

The Liontrust UK Microcap Fund has performed exceptionally well over a number of years, with a lower level of volatility than the market as a whole. The fund attributes this performance to its investment style and focus on buying smaller companies that are profitable, have strong business models, and often strong balance sheets (due to owner managers).

The Liontrust UK Microcap Fund suffered from the market sell-off in early 2022 and downward valuations for quality growth companies across the market spectrum. As a result, it is currently down 14-15%. Initial impacts experienced by the fund affect some of its more consumer-facing stocks, as well as the fee-based financial stocks, both of which are driven by macro factors.