Jeremy Lang has sold the index of the largest 20 stocks in the FTSE 100 from his Liontrust First Growth fund for the first time since 1998.Liontrust says the decision to sell the index reflects the increased confidence about the stockmarket environment for the “Lang Approach”. “Jeremy has been finding more investment opportunities within the Liontrust First Growth fund than for many years,” says Jonathan Harbottle, marketing director of Liontrust. “This is shown in the short-term performance of the fund, which we are confident will continue.” “A growing number of stocks are now being rewarded for earnings surprises than has been the case over the past few years,” he adds. “This is because the market has returned to greater rationality. “The compression of prices between the good and poor-quality companies has promoted investment opportunities.” Harbottle adds that since the index was sold by the Liontrust First Growth fund in mid-March, the number of stocks in the portfolio has risen to 98, reflecting the greater number of investment opportunities Lang can find. Previously, the fund held between 70 and 80 stocks. About 50% of the fund is now invested in the FTSE 100, 37% in mid-cap stocks and 13% in small-caps. “Jeremy has taken a significant allocation against the FTSE 100,” says Harbottle. “It was not a conscious decision but is a result of where he has been finding stocks with the potential for earnings surprises, which are now being rewarded by the market to a greater extent than over the past few years.” The 190m Liontrust First Growth fund was launched in 1996 and had its 10th anniversary on April 1. The “index spine” of the 20 largest stocks in the FTSE 100 was added to the fund’s portfolio in 1998. The index spine has been used as a risk control on the fund by providing exposure to the largest stocks in the index. Over the past eight years, Lang has been able to move between -50% and +50% of the index weightings of these 20 stocks. “If we had not sold the index from the fund then we would have been doing our investors a disservice,” says Harbottle. “If we had not done this, the fund’s performance might have been restrained. Therefore, we do not see it as adding risk to the fund.” Harbottle says the index spine may be reinstated in the future when the market environment changes again.