Interactive Investor

Coronavirus ii ACE 30 update: Liontrust UK Ethical Fund

interactive investor's analysts bring you an urgent update on this ii ACE 30 rated ethical investment.

31st March 2020 17:10

Dzmitry Lipski from interactive investor

interactive investor's analysts bring you an urgent update on this ii ACE 30 rated ethical investment.

The coronavirus outbreak and subsequent pandemic have had a significant impact on the global economy and financial markets. Many share and fund prices have fallen sharply in a very short space of time, as has the cost of oil and other commodities. Volatility has reached levels not seen since the peak of the financial crisis in 2008, and many assets remain prone to sharp movements both up and down.

Given these unprecedented circumstances, with citizens in many of the world’s largest cities confined to their homes, we are collecting updates from managers of funds on the ii ACE 30 rated list of ethical investments. 

Here is the latest from the Liontrust Sustainable Investments Team on 30 March. 

Liontrust UK Ethical Fund

“The funds have experienced a difficult period of short-term performance over the last month. However, we encourage a long-term view and to look through this market volatility where some companies are falling up to 80% only to rise 50% in the following days. The intrinsic value of companies typically doesn’t change this dramatically in such a short period.

“The main detractor has been the consumer discretionary sector, with a number of our holdings selling-off with zero revenues for an undefined period. Companies such as Crest Nicholson (LSE:CRST), Cineworld (LSE:CINE) and Gym Group (LSE:GYM) are cutting costs as far as possible and speaking with creditors to navigate through this unprecedented period.

“Our focus has been first on the long-term thesis: have the prospects of the companies changed five and 10 years from now? Second, how are the companies positioned for the next six to 12 months in terms of cash position, ability to flex down their cost base and access debt facilities. In the majority of cases, we remain confident in the long-term prospects and we have been in contact with nearly all of the management teams to understand how they are dealing with these challenging times. 

“The Gym Group is a good example. We believe the long-term demand for low cost fitness is undiminished, indeed it may even be bolstered after a period of lockdown and as people look to reduce their expenditure. We have spent time speaking to the management team and discussed the measures they have taken to cut costs and adapt their service to provide fitness instruction at home for their members. The company entered this crisis with a strong cash position and low levels of debt, and therefore we believe they can emerge stronger than small independent peers or even large highly levered competitors. 

“As long-term investors, our approach is to find high-quality companies contributing to the development of a more sustainable economy. Short-term periods of market volatility like this can help us increase our positions in high-quality companies with strong long-term prospects. We therefore remain confident that the Fund is positioned well for the long term, and look through this period of market dislocation and volatility.

“The strongest contributors during this period on a relative basis have been London Stock Exchange (LSE:LSE), Helios (LSE:HUW), Softcat (LSE:SCT) and Smart Metering Systems (LSE:SMS). The weakest contributors on a relative basis have been Crest Nicholson Holdings, Cineworld Group, National Express Group (LSE:NEX) and Trainline (LSE:TRN).

“We currently have no concerns about liquidity and being able to meet individual client redemptions.”

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.