Bestinvest says
Anthony Cross now has a successful track record dating back to 1998 on this fund, and since 2008 has benefited from the input of co-manager Julian Fosh. Previously known as Liontrust Intellectual Capital, the fund’s name was changed in 2010 but intellectual property remains a favoured characteristic in investments and the fund typically has a large weighting to technology shares. Historically the fund has proved resilient in falling markets, though the distinct investment style has also led to periods of underperformance relative to the peer group.
The fund invests in companies from the FTSE Small Cap and FTSE Fledgling indices and the AiM market – companies progressing to the FTSE 250 are typically sold. The managers target companies with what they call “Economic Advantage” – characteristics their competitors will struggle to replicate. These typically fall into three categories: (1)Intellectual property; (2)Strong distribution channels; (3)Significant recurring business. The managers believe that company profits revert to the mean over time, and that only companies with Economic Advantage can defy this and sustain above average profits over the long term.
Though the managers look for businesses capable of growing over the long term, they recognise that economic cycles can interrupt their growth. Such companies can be overlooked by the market, so they also look for companies with underappreciated potential earnings growth. They believe that they will surprise the market with strong growth, delivering an uplift in the share price.
The managers also require directors’ share ownership of at least 3%, believing this helps to align their interests with outside shareholders.