Liontrust – Sustainable Future Funds

overall rating:

0.5

planets

Matthew Ball
2/21/2022
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Liontrust Asset Management plc is a British asset management company based in London. They label themselves as taking pride in their distinct culture and approach to fund management. They are a relatively young asset management company, being created in 1995 - and have funds focused on primarily the UK, as well as Europe and Asia more generally.

 

The Sustainable Future Funds are a collection of funds, comprised of 14 funds - 11 of which are tied to either the UK or Europe specifically, while two focus on a global scale. Across the funds there are varying conditions of investment, for example being tied to Global or European Growth.

 

The aims of the Sustainable Future Funds specifically are to deliver capital growth over the long term - defined as 5 years - through investing in a combination of global equities, bonds and cash. The investment ​​process itself uses a thematic approach to identify growth trends - and holds the rather broad focus of any investments that will “improve people’s quality of life”. Here is the first glaring issue with the fund, that being a focus that will ensure that any investment pitched can be justified in some form - as the fund’s description itself lists at minimum a focus on “medical, technological or educational advances”. This falls in line with the equally broad wording of the funds themselves, that being ‘sustainable futures’ which again can take many different meanings depending on the context in which you are aiming to be ‘sustainable’. Educational advances for example may not align with environmental sustainability - with sustainability taking the more literal term of something that can last into the future, rather than the more environmentally based connotations which it has taken on.

 

Analysing the fund against this backdrop nonetheless, there still remains glaring issues which cannot be overlooked. Notably, the website itself is organised horrendously - in order to ensure that all meaningful data, insight or general information is barred or tied into separate windows and pages which means that researching the funds themselves is painful at best. There is a clear intention to ensure that blurbs of rousing text are centre-stage, while the nitty-gritty details and specifics are very much left in the background. With the website being arguably extremely well designed in this manner, as it ensures that no meaningful information can be easily attained whatsoever.

 

Behind the scenes of the fund(s) show that it is a for profit operation, with little to no regard for anything else. The gender diversity through the company is abysmal, the wage inequalities between senior and junior employees is also abysmal and the company itself seems to be stuck in a vicious cycle of profit over the planet - both from a human and environmental perspective - and it can be really felt.

What it's made of:

0.5

The sheer craft in relation to the design of these funds and how they are presented to potential investors is what first stands out. No information is directly withheld per-se, yet it is hidden behind meaningless and uninformative titles so as to offer no interest in transparency whatsoever. Notably, information on funds specifically are simply labelled “Factsheet A1”, “Factsheet A8” etc. which serves to only be a major headache to anyone trying to research the behind the scenes of the funds themselves.

 

As expected, this is to hide a complete embarrassment of a fund, in all manners. To label this fund as ‘sustainable’ in any capacity is frankly an insult to the term. We begin with the Sustainable Futures - Global Growth fund, to offer a broad picture of the funds as it’s the flagship of the line. With over 60% of investments being focused in their United States of America - enough has already been said to outline the clear lack of ‘global focus’ that this fund has despite its name. Beyond this, just 2 out of the top 10 countries for investment are outside of Europe - with Australia and Japan respectively. It’s insulting before even delving into the sector breakdown of investment, which is no saving grace. Here we see 34% invested into Information Technology, followed by 17% in Healthcare. When sustainability is first thought of as a concept in most people’s minds, I would argue that a fund with a focus on two geographical areas and an overwhelming investment in Information Technology would not even be close to what is first imagined.

 

The European based funds do nothing to break this general trend either. With again the top two sectors of investment for the European Growth fund being Information Technology and Healthcare at 25% and 18% respectively. It’s honestly laughable. This is a clear example of a simple ‘cookie-cutter’ approach to investing being employed, with the branding surrounding it simply being as vague as necessary to ensure that it can be labelled as ‘sustainable’. There are clear intentions to try and obscure this from the vision of investors. Of specific note is the breakdown of what would normally be a simple ‘global sustainable investment fund’ into 14 separate smaller funds which all hold the exact same focus - which solely ensures that it takes longer to decipher the true nature of this collection of funds.

 

Of particular enjoyment is the flashy graphics and advertisement for the funds which specifically list ‘education’ as a central focus of the funds. Yet it’s clear that this isn’t wholly true. With technology being the primary area of investment, alongside developed countries hosting the overwhelming majority of investments - it’s embarrassing to even attempt to advertise these funds along those lines.

 

Overall, this fund series  is let down immediately by a focus on profit over any real sustainable action. The focuses of the funds - both geographically and sectorally - are of critical issue. No fund can truly be sustainable when a lack of diversity as blatant as this is upheld. Therefore this section receives 0.5/3.

How it's made:

0.5

Turning to how it’s made, Liontrust itself details quite fowardly - in a central graphic - its investment process. This consists of a period of identification, followed by engagement directly with the companies. That is the extent of the revealed investment decision making process immediately, keeping things as vague as possible.

 

This being said, the categories which investments are grouped into are detailed - including, improved health, better resource efficiency, greater safety and resilience and quite counterintuitively, cash and finally, portfolio construction/diversification.  There are no specific limitations as to the amount of one category that can be invested in or any geographical limitations - as made clear above - which again highlight the more unsustainable aspects of the fund. 

 

There are published breakdowns of the individual sizes of the categories, with there being 35% across greater safety and resilience, 33% for improved health and 26% in better resource efficiency - which has the lowest holdings despite being the most closely aligned to sustainability. Yet, this again highlights an issue with the fund, that being no further clarity as to how these seemingly arbitrary categories have been determined. For example, a category within greater safety and resilience is entitled, enhancing digital security. This itself could be sustainable from a digital perspective, yet not from an environmental perspective - such as elements of blockchain or crypto. There is no hard test or ruling against any of the investments, proposed categories or managing of the fund overall in the context of sustainability and it shows. Furthermore, 10% of the category ‘better resource efficiency’ centres around improving oil use efficiency. This is NOT sustainable. It may be an adaptation and mitigation measure to help catalyse more action towards green energy production in the short term, but for a fund that is so future focused - both on return of investment and it’s entire conception - it’s shocking that this specifically would be included.

 

Ultimately, there is a lack of sustainable rationale behind the investment decisions at Liontrust in regard to their Sustainable Future Funds. Resultantly, this section also receives 0.5/3 as there is no true logical or sustainable process whereby the investments made align with the ethos of the fund itself. It seems to be a set of investments that have been frankensteined together under the guise of sustainability. 

Who makes it:

0.5

In a predictable fashion, the team that manages the Sustainable Futures Funds is extremely transparent - as are their collective achievements - in some bizarre out-of-touch bragging competition of sorts. Their faces are plastered across both the website and official documentation, presumably to try and give credit to the work that is being undertaken in relation to the funds. This being said, the advisory committee is made up of 2 men and 2 women, with a range of experience between them - which all in all is a very welcomed sight. As will be a trend for this section, there are some key steps of progress in relation to the background of the management team and this itself suggests that Liontrust as a company is more at fault than any specific individual that runs the Sustainable Future Funds.

 

Beyond the central advisory committee are 17 investment managers, portfolio managers and trainees. The vast majority have backgrounds in either mathematics or economics, yet a few have backgrounds in sustainability directly or environmental management - which shows progress to at least diversify the background of managers and is again appreciated and suggests that the limitations of this fund go beyond the individuals themselves. Furthermore, there is a good range of experience between the managers - with trainees also being included - which suggests at the very least that there is a focus on building the reputation of the fund and to develop it further in the future - which is promising. 

 

Going into the officially published stats, 50% of the staff have between 1-5 years experience which again will hopefully bring in a new era for the company per-se. Notably the company is 2/3rds male dominated, which is commendable - given the industry specifically - but there are just 3 of 30 senior employees that are women which is of specific concern. There are the largely industry standard employee benefits of healthcare support and statement for diversity targets - which seem to have failed to have been fully realised at a senior level. Beyond this, there is little more to say. There is not much revolutionary or redeeming in this section sadly, the younger workforce is a welcome addition, yet the lack of gender diversity at a higher level suggests that this is a recent change to the companies operations and that there remains much work to be done.

 

Finally, focusing on Liontrust as a company - there is considerable controversy surrounding wage inequality and clear issues of greed within the company. Notably, a chief executive has seen his wage increased by 58% recently, to £550,000 per year - almost 20x the average wage in the UK - with over half of Liontrust’s shareholders protesting this. It being the only notable form of either praise of controversy in regard to Liontrust is reflective of the wider values that the company holds. Profit above all else. This fund, and clearly the executives behind the company, have little to no care or consideration for the power they hold - besides to keep the profit coming in - which will ensure they maintain their healthy paychecks and thus, the vicious cycle repeats.

 

Overall, for this section, Liontrust’s sustainable futures funds receive 0.5 / 3 – saved purely by the youth representation at lower levels and limited gender diversity there as well.