We have added Liontrust UK Micro Cap to The Adviser Centre as a Recommended fund.

Fund snapshot

A UK micro-cap fund whereby the managers use a well-established and distinctive process to identify businesses that have durable competitive advantages.  The ‘Economic Advantage’ approach focuses upon intangible strengths that are difficult to replicate and support structural growth.  Within its sector, the fund features in our ‘Micro-Cap, Growth’ category.

Fund description - key points

• Victoria Stevens, Matthew Tonge and Alex Wedge, supported by Anthony Cross and Julian Fosh, are co-managers of the fund.  They are members of Liontrust’s Economic Advantage team.
• Mr Cross leads the Economic Advantage team.  Messrs Cross and Fosh are the architects of the long-standing ‘Economic Advantage’ approach which seeks to identify companies with a long-term competitive advantage.
• Philosophically, they believe that it is possible to identify a small number of companies that can resist the natural forces of competition to maintain high profitability for longer than the market assumes.   Their ‘Economic Advantage’ approach focuses upon intangible strengths that are difficult to replicate and support structural growth.
• The team is passionate about the long-term opportunities in this specialist asset class whilst also understanding the need to balance investment discipline with pragmatism and patience.

Characteristics and utility

• The fund resides in the IA UK Smaller Companies sector.  It is important to note that, given the fund’s micro-cap focus, its composition and structure is likely to be markedly different from its benchmark and peers.
• The fund has a permanent growth profile and, sector-wise, there is a bias towards IP-rich manufacturing, technology and service companies.
• By their nature, micro-cap stocks are high risk investments.  However, the team’s deep experience of small and micro-cap investing, together with the focus upon companies with durable competitive advantages, helps to mitigate some of the additional risks for which this part of the market is renowned.
• In terms of potential returns, micro caps typically benefit from a liquidity premium.  By the same token, investors should be cognisant of the risk of variable and, at times, diminished liquidity, particularly at times of market stress.
• The fund is suited to long-term, risk-tolerant investors who wish to access the growth opportunities offered by micro-cap companies.

To view our full factsheet, please visit the fund page.