Introduction to Liontrust - Flipbook - Page 9
Investment process
• The process seeks to identify companies that possess intangible
assets which produce barriers to competition and provide a
durable competitive advantage that allows the companies to defy
industry competition and sustain a higher than average level of
profitability for longer than expected.
• In the fund managers’ experience, the hardest characteristics
for competitors to replicate are three classes of intangible asset:
intellectual property, strong distribution channels and significant
recurring business.
• Other less powerful but nonetheless important intangible strengths
include franchises and licenses; good customer databases and
relationships; effective procedures and formats; strong brands
and company culture.
• These intangible assets produce barriers to competition, protect
margins and are capable, in the opinion of the fund managers,
of reaping a financial advantage in the form of cash flow returns
in excess of the cost of capital. A company that consistently
generates excess cash flow returns will benefit from compounding
as it reinvests this excess return into the business.
• Every smaller company held in the Economic Advantage funds
has at least 3% of its equity held by senior management and
main board directors. Companies are also assessed for employee
ownership below the senior management and board and changes
in equity ownership are monitored.
Liontrust UK
Micro Cap Fund
Liontrust UK Smaller
Companies Fund
Liontrust Special Situations
Fund / All Cap strategy
Liontrust UK Growth Fund
Micro Cap
Micro / Small Cap
Small / Mid / Large Cap
- Invest under £175m
- Hold up to £275m
- Genuine ‘small cap’ product
- Average market
cap £750m
- All cap product
- Target 20-30% small cap
- Predominantly FTSE 350 vehicle
- Max 10% small cap
- Index-plus weighting
(FTSE All Share)
Mid / Large Cap
Intangible company strengths that competitors struggle to reproduce = Barriers to competition
Intellectual property
Franchises and
licences
Customer databases
and relationships
Distribution channels
Procedures
and formats
Repeat business
Culture
Brand
Liontrust investment teams and funds - 9