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23-09-21

Distribution change on Monthly Income Bond Fund

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.

Liontrust's Sustainable Fixed Income team believes flexibility is key for managing the Monthly Income Bond Fund (MIBF). This is so the team has the tools to manage risk throughout the economic cycle and the ability to seek to deliver a leading level of income with lower volatility over the long term. Stock selection on the Fund focuses on identifying the best-value bonds from high-quality issuers with the aim of maximising risk-adjusted returns.

Given current market conditions, the fund managers have decided to reduce the monthly income distribution on the Fund from 0.40p to 0.34p per unit, with effect from the end of September, so they can continue to meet the above objectives. With UK government bond yields near historic lows and credit spreads compressing over the past two years, they feel the current monthly distribution level is no longer sustainable over time. In addition to falling yields across the market, many of the higher-yielding bonds in the portfolio have also been redeemed or called over the past year.

With valuations close to multi-year lows, the managers do not believe it is appropriate to add risk at this stage in order to chase yield, as this could potentially increase volatility and downside risk.

Even after the reduction, we believe Monthly Income Bond will likely remain among the highest-yielding funds in the IA Sterling Corporate Bond sector (which is the comparator benchmark), if not the highest. We want to reiterate that the Fund does not have an explicit yield target and we have always been clear we are prepared to cut income if necessary to maintain credit quality.

The overall distribution from the Fund for 2021 is expected to be around 4.56 pence per unit, which equates to a yield of 4.46% based on the standard B Income share class price at the start of the year. Post the monthly reduction, the distribution for 2022 is expected to be around 4.08 pence per unit, which equates to a yield of 4.08% based upon the current B Income share class price.

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Key Risks 
 
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
 
Some of the Funds managed by the Sustainable Future team involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. Investment in Funds managed by the Sustainable Future team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the rate of interest. Some Funds may invest in derivatives. The use of derivatives may create leverage or gearing. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead.

 

Disclaimer
 
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
 
This 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 

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