AJ Bell financial analyst discusses Liontrust ESG trust

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Laith Khalaf, financial analyst at AJ Bell, comments on the Liontrust ESG trust launching next week.


Laith Khalaf comments:

“A couple of high profile investment trust launches failed to get off the ground last year, but Liontrust has a few aces up its sleeve. The vaccine roll-out has delivered a significant boost to investor confidence, and Liontrust is launching this trust in the ESG space, where we know there is a lot of demand right now. Liontrust already has a well-established ESG range and the new investment trust will be run by the same team who manage the longstanding Sustainable Futures franchise, along similar lines to their existing Global Growth fund.

“The Liontrust sustainable investment team is one of the oldest in the business, having started life in 2001 at Aviva. Experience counts for nothing if it doesn’t deliver performance though, and the Sustainable Future Global Growth fund has shot the lights out on that front, ranking 15th out of 194 funds in the Global sector over ten years, with a total return of 310%, compared to 224% from the MSCI World Index.”

Liontrust ESG Trust versus Liontrust Sustainable Future Global Growth

“The ESG investment trust is a more high octane version of Liontrust’s existing global fund, and will invest in ways which make it riskier, but with the potential for greater returns in the long run. The trust will make use of gearing straight from the off, and borrowing is expected to be around 10%, which should help to turbo charge long term returns in a rising market, but also accentuate drawdowns along the way. The investment trust will also invest in some smaller companies opportunities the fund can’t access, which again opens the door for a performance kicker, but at the cost of added risk.

“The trust will be a more concentrated portfolio of around 30 stocks, compared to 50 in the open-ended fund, which is already a high conviction portfolio. The investment trust will also be even choosier when it comes to sustainability, thanks to the wider investment pool and more concentrated portfolio. Overall around two thirds of the two portfolios will be the same however, so there is a high degree of overlap between the fund and the trust. The fund edges it in terms of annual charges, coming in at 0.88% compared to 1.07% for the ESG trust, though the fixed administrative costs of the latter should fall as the trust grows in value. Both the fund and the trust leverage the proven expertise of the Liontrust Sustainable Future Growth team, and merit consideration by investors looking for global ESG exposure.”

Making UN SDGs more investable

“The trust is donating 10% of the investment management fee to projects that explore the potential for investment instruments relating to four Sustainable Development Goals that are hard to invest in. This is a long term goal but it could ultimately help to broaden out the ESG investing universe into areas where investment exposure is challenging, and any resulting investment opportunities won’t be limited to just the Liontrust ESG Trust.”

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