If you are trying to find a decent managed fund to invest in, you’ve got a tough job on your hands. It’s hard to predict whether a fund will go on to perform well even if it, or its manager, has performed well in the past.
There’s never a guarantee that previous good performance will continue, and we saw a good example of that phenomenon with the Woodford funds recently. But however well or poorly the investments chosen by a fund manager perform, the fund management company itself tends to keep collecting its fees.
Aligning with evergreen stock market winners
And as long as the funds don’t crash well below their benchmarks, there’s a good chance investors will stay loyal to them and the cash taps will remain open for the management company. Indeed, many do very well, so I reckon it’s worth considering investing directly in a fund management firm to align ourselves with the evergreen winners on the markets.
I like the look of Liontrust Asset Management (LSE: LIO). The company has an impressive record of rising revenue, earnings and dividends, which reflects in a share price that’s been tearing upwards. And today’s half-year results report for the period to 30 September contains more good news, judging by the figures.
Adjusted profit before tax rose 17% compared to the equivalent period the year before and the directors slapped almost 29% on the interim dividend. I reckon a move like that signals confidence in the outlook, and one of the chief attractions of the stock for me is the impressive record of growth in the dividend. Over the past five years, it’s up by more than 300%.
In October, Liontrust acquired a firm called Neptune Investment Management, which added £2.7bn to the figure for assets under management (AuM). On the 18 November, AuM stood at £17.9bn, which strikes me as a decent chunk of other peoples’ money from which to skim ongoing fees – which is great if you are holding shares in Liontrust!
And the investors keep rolling up, attracted by the steady performance of the firm’s 50 or so funds and, I’m guessing, by big marketing and sales effort. The headcount in the sales team suggests that to me. Net inflows for the six-month period came in at £1,367m, which compares to £723m a year earlier.
Good process
I like the way the company focuses on the investment process. On the company website, it says: “We believe investment processes are key to long-term performance and effective risk control.”
I couldn’t agree more. When it comes to successful investing strategy, the process is everything. The company reckons its processes are “robust, scalable, repeatable and documented.” And that approach helps my confidence in making an investment in Liontrust itself.
Looking ahead, the company said in today’s report it’s “well-positioned” to sustain its growth trajectory “despite a challenging environment for UK asset managers.”
Meanwhile, with the share price at 890p, the forward-looking dividend yield for the trading year to March 2021 is just above 4%. I think the shares are attractive.
