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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
The Liontrust Special Situations Fund returned 6.7% in Q2 2026, outperforming the FTSE All-Share Index which returned 4.7%. The quarter saw progress towards a US-Iran ceasefire, allowing equity markets to rally with notable outperformance from the Quality style factor and small and mid-cap stocks in April and May. Small and mid-caps showed signs of reversing their multi-year underperformance, with the FTSE 250 returning 9.8%, FTSE Small Cap 11.1%, and FTSE AIM All-Share 8.3%, versus 4.0% for the FTSE 100. The Fund benefited from strong performance in holdings like Intertek, Renishaw, TP ICAP, and Auction Technology Group. Energy holdings BP and Shell declined following the Iran ceasefire and a 20% drop in oil prices in June. The managers view the extreme valuation compression for small and mid-caps since late 2021 as a compelling opportunity. For the first time in its 20-year history, the Fund trades at a discount to the wider UK market on price/earnings despite superior Quality characteristics, with a free cash flow yield of 8.4% versus 7.1% for the FTSE All-Share.
The Liontrust Special Situations Fund invests in high-Quality UK companies with strong intellectual property, distribution advantages, and the ability to compound earnings over the long term, with a current focus on small and mid-cap stocks trading at historically depressed valuations.
The managers view the current environment as presenting compelling value in UK equities, particularly concentrated lower down the market cap spectrum and within businesses with Quality characteristics. They believe the extreme valuation compression for small and mid-caps since late 2021 represents a significant opportunity for patient, long-term investors. The Fund is trading at a discount to the wider UK market for the first time in its 20-year history, despite superior Quality characteristics. The tone is constructive and patient, emphasizing long-term compounding potential.
As of Aug 11, 2026
Anthony Cross joined Liontrust in 1997 and has managed the fund since inception in November 2012, previously working at Schroder Investment Management with a degree in Politics from Exeter University (1990). He launched the Liontrust UK Smaller Companies Fund in 1998 and has been instrumental in developing the Economic Advantage investment process. Victoria Stevens joined the Economic Advantage team in June 2015, focusing on small cap investment opportunities with experience in corporate broking and financial journalism. Matthew Tonge joined Liontrust's trading desk in 2003, became a partner in 2011, and was voted Mid-Tier trader of the year in 2014. The team was expanded in May 2023 with Stevens and Tonge joining Cross as co-managers.
The fund applies the Economic Advantage investment process to identify companies that possess intangible assets which produce barriers to competition and provide a durable competitive advantage. The process seeks companies that can defy industry competition and sustain higher than average profitability for longer than expected. The hardest characteristics for competitors to replicate are three classes of intangible asset: intellectual property, strong distribution channels and significant recurring business. All smaller companies in the fund must have minimum 3% equity ownership by senior management. The fund invests at least 80% in companies traded on UK and Irish stock exchanges and is not restricted by company size or sector.
Lead Portfolio Manager
Moderate Conviction Bullish
Market Conviction
The Fund demonstrates moderate-to-high conviction through its concentrated focus on Quality small and mid-cap UK stocks with named positions and specific performance attribution. The managers provide detailed commentary on individual holdings with position sizing context (e.g., Intertek +62%, Renishaw +45%, TP ICAP +30%). They express strong conviction in their investment process, stating they 'remain resolutely focused' and emphasizing 'conviction in the ability of high-Quality companies to compound returns strongly over the long term.' However, the Fund appears to hold 10-25+ positions based on the breadth of names discussed, and some hedging language is present around macroeconomic uncertainty. The score reflects high conviction in the Quality approach and specific holdings, but not the extreme concentration of a 5-stock fund.
Growth Outlook
Market outlook remains high conviction: Fund underperformed due to Middle East conflict driving risk-off sentiment that disproportionately hit smaller companies despite strong fundamentals. Energy holdings BP and Shell s...
Risk Appetite
Risk appetite posture is very low conviction: Fund underperformed due to Middle East conflict driving risk-off sentiment that disproportionately hit smaller companies despite strong fundamentals. Energy holdings BP and Shell s...
Capital Deployment
The letter provides no explicit information about changes in cash levels or net deployment activity. The managers describe adding to some positions (implied by performance attribution) and experiencing takeover activity, but also note trimming in energy holdings. The overall impression is one of rotation and rebalancing rather than net deployment or de-risking. Without specific cash level data and given the balanced nature of additions and reductions, the score reflects near-neutral activity with a slight positive bias given the constructive tone.
Forward Guidance
Forward guidance signal: Fund underperformed due to Middle East conflict driving risk-off sentiment that disproportionately hit smaller companies despite strong fundamentals. Energy holdings BP and Shell s...
Language Signal
The letter contains predominantly positive directional language including 'compelling opportunity,' 'compelling value,' 'attractive,' 'green shoots emerging,' 'encouraging,' and 'superior Quality characteristics.' Risk language is present but balanced, with mentions of 'uncertainty,' 'volatility,' and 'challenging' offset by opportunity framing. The net balance tilts toward bullish language, particularly around valuation opportunities and the reversal of small-cap underperformance, supporting a moderately positive score.
Perceived Risk
Perceived risk level is evaluated as moderate conviction. Fund underperformed due to Middle East conflict driving risk-off sentiment that disproportionately hit smaller companies despite strong fundamentals. Energy holdings BP and Shell s...
Opportunity Density
The managers view the opportunity set as rich, particularly in UK small and mid-cap Quality stocks. They explicitly state 'there remains compelling value in UK equities, concentrated lower down the market cap spectrum' and describe the valuation compression as creating 'a compelling opportunity.' The Fund is trading at historically attractive valuations relative to the market, and the managers identify multiple attractive holdings across sectors. The positive framing of opportunities and the breadth of attractive names discussed support a high opportunity density score.
Time Horizon
The managers emphasize a multi-year investment horizon, repeatedly using language like 'long term investors,' 'compound returns strongly over the long term,' and 'long-term holding.' They describe their focus on companies that can 'compound earnings strongly into the future' and emphasize patience. However, they also discuss near-term catalysts like quarterly trading updates and takeover activity, suggesting a 2-5 year thesis timeframe rather than a permanent capital approach. The score reflects a clear multi-year horizon with patience for thesis realization, but not the decade-plus timeframe of permanent capital vehicles.
Top Conviction Themes
Key Catalysts
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