By James Thorneley Liontrust Asset Management is suggesting to the unitholders of Liontrust First Gr...
By James Thorneley
Liontrust Asset Management is suggesting to the unitholders of Liontrust First Growth that they switch into the investment trust Liontrust First UK.
Both vehicles have exactly the same portfolios and are managed by Jeremy Lang. The only difference is that the investment trust is 12% geared and is sitting on a 9% discount to NAV.
Lang said: "The only problem for unitholders is that the investment trust is quite small in size and its shares are scarce. Many of the unitholders have around £500,000 so would find it difficult to switch completely in the closed-end vehicle."
After a run of underperformance in the eight months to May 1999, the portfolios of both vehicles have started to outperform within their respective peer groups. Over three months the £213m unit trust is ranked 16 out of 272 in the Micropal UK All Companies peer group. Whereas over one year it is ranked 81 out of 255. The £31m investment trust in the UK Capital Growth peer group is ranked two out of 12 over three months and is placed ninth out of 12 over one year.
Lang put the poor performance run down to a combination of his investment style and the downturn the market started to take in October 1998 due to fears of recession.
He said: "My investment style is one of identifying stocks which have surprised on the upside and I expect to surprise again. So when there is a downturn in the market not many companies will surprise. In addition when there is an upturn, as there was in the first quarter of 1999, the companies that led the market initially disappointed which excluded them from my remit."
In June Lang turned over 30% of the portfolio. He sold out of defensive sectors, such as utilities, which he bought into at the beginning of the year. One sector he increased his exposure to was media and in particular advertising agencies.
He said: "Advertisers are big beneficiaries of the boom in website launches. A large part of website companies' expenditure is on sales and marketing to initially gain a market share and then maintain it. To me it is a great way to play internet stocks as there is a degree of uncertainty over which companies will fail and which ones will succeed but advertising companies will benefit either way."
Another sector he altered exposure to was retail. He shed stocks that are positioned in the middle ground and invested in stocks at either end of the market - luxury retailers and discount stores. Lang said: "At one end the 'pile them high sell them cheap' brigade is gaining in people's affections. When most clothes look the same and are similar in quality, the price becomes more important to the decision than where to buy them. Hence discount retailers, like Matalan, are doing and will continue to do well.
"Price almost becomes an irrelevance at the other end of the spectrum. In fact the more expensive the clothes the better, the portfolio has exposure to Selfridges. It is the shops at the mid point that are feeling the pressure."
There are around 77 stocks in the investment trust portfolio. The largest holding in the portfolio is BP Amoco with a weighting of 8.6%. This is followed by Vodafone Airtouch and British Telecom with portfolio weightings of 8.2% and 4.4% respectively.
Other companies favoured by Lang include Pace Micro Technology, Nestor Healthcare, Royal Bank of Scotland, Glaxo Wellcome and SmithKline Beecham.
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