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Liontrust expands into investment trusts with launch of ESG investment trust

Liontrust has announced its intention to expand into closed-ended investments by launching Liontrust ESG Trust PLC (ESGT/Trust, ticker: ESGT).

The portfolio of ESGT will be managed by Peter Michaelis, Simon Clements and Chris Foster, who are part of the 13-strong Liontrust Sustainable Investment team with a 20-year track record of managing sustainable funds. Peter and Simon have managed sustainable global growth strategies since 2001 and 2010 respectively with Chris becoming a co-manager in 2020 (having joined the team in 2015).

The launch comes at a time of rising interest in sustainability and demand for sustainable investment. The AuMA (assets under management and advice) of the range of open-ended funds and institutional mandates managed by Liontrust’s Sustainable Investment team grew from £2.5 billion on 1 April 2017 when they joined from Alliance Trust Investments to £10.2 billion on 31 March 2021.

Research conducted for Liontrust in December 2020 reveals that 78% of wealth managers and 71% of financial advisers have seen an increasing proportion of their clients investing sustainably over the previous year (Source: Research in Finance).

ESGT will invest in 25 to 35 sustainable companies around the world, predominantly in developed markets. The permanency of capital of an investment trust will enable the investment managers to be unconstrained by market cap when selecting investments. This will allow them to construct a high conviction portfolio with less consideration of shorter-term volatility than when managing open-ended funds. The Investment Manager will include small cap stocks within the portfolio that are not held by the open-ended funds they manage.

ESGT will be managed using the Liontrust Sustainable Future investment process. Since 2001, the team has used this process to identify companies helping to create a cleaner, safer and healthier world. The team seeks to generate attractive returns for investors by identifying the key structural growth trends (Better resource efficiency, Greater safety and resilience and Improved health), and 21 underlying themes within these, that will shape the sustainable economy of the future.

The investment managers aim to identify well-run companies whose products and operations benefit from these themes. Further analysis hones this list down to those companies that exhibit superior management, will deliver persistently high returns on equity and are attractively valued on a five-year view.

According to Liontrust, the performance of the Liontrust SF Global Growth Fund demonstrates the success of this process. It is in the 1st quartile of the IA Global sector over three, five and 10 years; and over 10 years to 31 March 2021, the Fund has returned 260.3% compared to 198.1% by the MSCI World Index and 154.1% by the IA Global sector (Source: FE Analytics, Primary share class, total return, net of fees, income reinvested)[1]. MSCI World Index and the IA Global sector are comparator benchmarks.

Peter Michaelis, portfolio manager, said: “We are excited by the opportunities that ESGT offers in being able to construct a high conviction portfolio with companies from across the market cap spectrum and our sustainable investment themes.

“Key attractions include the wide opportunity set it provides as it is unconstrained by market capitalisation, a concentrated portfolio focused on the highest sustainability companies and the chance to invest a portion of the portfolio in small cap companies that we do not hold in our open-ended funds. These stocks fit perfectly with our focus on the long-term drivers of the sustainable economy of the future.

“Looking to the long-term benefit for investors, up to 10% of the management fee we receive from ESGT will be used to fund research to identify and develop financial instruments covering those UN Sustainable Development Goals (SDGs) that are currently uninvestable.

“When these financial instruments are developed, they will become available to ESGT and other investors.”

John Ions, Chief Executive of Liontrust, added: “This is a significant launch for Liontrust in expanding our offering into investment trusts.

“The intention to launch ESGT recognises the growing demand for sustainable investment as an increasing number of people want their investments to make positive contributions to society, the environment and the economy.

“ESGT will enable a wider range of investors to access Liontrust’s Sustainable Investment team and its proven process. Over the past two decades, the Sustainable Investment team has demonstrated the ability of its investment process to outperform mainstream benchmarks and the impact of its funds on sustainable development.”

Liontrust ESG Trust will be chaired by Richard Laing. Richard has extensive experience in UK listed investment trusts and public companies. During his executive career, he held the CEO and Finance Director roles of the CDC Group plc (formerly Commonwealth Development Corporation), giving him a strong background in sustainability and responsible investing. He is also Chairman of 3i Infrastructure plc and a non-executive director of JPMorgan Emerging Markets Investment Trust plc and Tritax Big Box REIT plc.

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