Liontrust Income Fund - Bringing income home

Liontrust Income Fund - Bringing income home

Liontrust Income Fund - Bringing income home

Why Liontrust Income Fund?

Robin Geffen has managed the Fund since launch in December 2002.

  • The Fund has outperformed the average fund in the IA UK Equity Income sector and the FTSE All-Share Index over 1, 3 and 5 years and since launch.
  • The Fund is ranked 2nd in the IA UK Equity Income sector over 3 and 5 years.
  • The portfolio has 33 equally weighted stocks across three silos: steady eddies, hidden fruit and tactical plays.
  • The silos are designed to provide diversification across investment styles and to enable the Fund to perform in different market environments.
  • The Fund aims to deliver an attractive yield and income growth along with and not at the expense of capital and capital growth.
  • The stock selection seeks to build a portfolio with high levels of dividend cover and sustainable income.
  • Liontrust Global Equity team aims to diversify the source of income from across the portfolio rather than from a small number of high-yielding stocks.
  • Around 16% of the portfolio is invested in North America to provide access to disruptive technology and global economic growth.
  • The Fund only invests in large cap stocks.

The risks of income stocks and the importance of diversification

The risk comes from the fact that for many years, the level of divided cover across the UK market has been falling as companies have increased their pay outs to shareholders above their growth in earnings. This has led to pay-out ratios reaching elevated levels, particularly among some of the most popular companies for income investors.

The tobacco sector illustrates the current environment. They are widely owned by income investors, with many believing them to be ‘defensive’ dividend paying stocks due to the perceived ‘safety’ of earnings visibility.

However, we believe many investors have overpaid for what are relatively muted earnings, and therefore muted dividend growth, while underestimating increasing levels of debt that these companies have been amounting. We have also believed the vaping hype was considerably overdone. Not only were tobacco companies cannibalising their own core products but we foresaw more stringent regulatory scrutiny.

Given the risk of the FTSE All-Share because of elevated pay-out ratios and the concentration of high yielding stocks, we believe a focus on income diversification is important. This approach provides some mitigation against unexpected dividend cuts by high yielding companies.

Our portfolio has a high level of dividend cover, being overweight such sectors as materials, financials and information technology and underweight such sectors as communication services and utilities.

Liontrust Income Fund

Liontrust Income Fund

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The Global Equity Process

The Global Equity Process

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Robin Geffen
The Fund Manager - Robin Geffen

Robin is a fund manager as well as the leader of the Liontrust Global Equity investment team and architect of its investment process. Prior to joining Liontrust in October 2019, Robin was a fund manager and the CEO of Neptune Investment Management, which he founded in 2002. He has previously worked at Charterhouse J Rothschild, Eagle Star, York Trust plc, Scottish Equitable and Orbitex Investments. Robin graduated from Oxford University in 1979 and has 40 years' investment experience.

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Key Risks 


Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.

Disclaimer


The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

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