Liontrust Global Dividend Fund Fund

The Liontrust Global Dividend Fund performed slightly better than its benchmark in January, with a return of -0.3% compared with the MSCI World Index return of -1.4% and IA Global Equity Income sector return of -0.4%.

In January, we exited three positions in response to strong performance – Anta Sports, TSMC, and Compass Group. In particular, Anta Sports and TSMC benefited from large sentiment changes as the business’s went from strength to strength. During times of irrational exuberance, we lean on our process and exit investments when stocks hit our three-year price target.

In response, we initiated three new positions – United Health, the leading US healthcare insurance provider is now well-positioned to execute its consolidation of its end market after the dissolution of the Amazon, JP Morgan and Berkshire JV who have provided United Health dominant market position and is difficult to replicate.

As we enter a period of tightness in the semiconductor industry, we see attractive opportunities in the equipment makers who enjoy monopolistic positions in semiconductor manufacturing value chain. In particular, Lam Research who has an excellent record of execution and capital allocation discipline is the most attractive across our Global Leader list with ASML reflecting high levels of investor optimism.

Lastly, we initiated a position in Alibaba after the stock of this Global Leader has collapsed almost 50% after the barrage of negative news flow about its co-founder Jack Ma and the scuttled Ant Financial IPO. We always like to swim against the stream when building positions in excellent companies and we see this as unique opportunity to investment in a best-in-class company at a bargain price.

Alibaba has built a dominant market position across multiple verticals with hard-to-replicate assets which we expect just like Amazon, Facebook and Google, to come under increased regulatory scrutiny but we see as these risks more than priced in for Alibaba.

Given the presence of extreme and somewhat concerning conditions within the market during the month, we are pleased with the stable performance of the Fund over the month. The biggest contributors to performance in January were Tencent, Hargreaves Lansdown and Texas Instruments. The biggest detractors to performance in January were Amadeus, Safran and Verisk Analytics. We view this as short-term underperformance and have added to positions in Amadeus and Safran during periods of significant weakness in these stocks.

The stock market has been strong in recent months, perhaps worryingly so. This strength is underpinned by low real interest rates, which we believe are likely to remain a feature of the economic backdrop for a long while to come. Nevertheless, the recent extreme enthusiasm for certain stocks exhibited by speculative market participants is likely to be punished at some point and when this happens it may reverberate more broadly across the market. While we therefore have little confidence in the robustness of the market in the short term, we firmly believe that investing in the most innovative businesses will deliver strong investment returns and outperformance over the coming years. As such, we continue to seek out and buy these businesses.

There is significant divergence appearing in the rollout of the vaccines across the major developed economies, which may have implications for varying economic recovery trajectories this year. The UK has already vaccinated 11% of its population with a single dose and looks on course to achieve the 50% milestone by April. While the US has vaccinated 6% and is on course to reach 50% by May, continental Europe – suffering from a relatively conservative approach to approvals and inefficiencies so far in distribution – has only vaccinated about 2-3% and currently looks like it might struggle to reach 50% in the first half of the year. There is early evidence that the vaccines are delivering results. Hospitalisations rates are falling in the UK and US and infection and hospitalisation rates are falling fastest in the oldest age groups who were first to be vaccinated.  

Discrete years' performance (%), to previous quarter-end:

Source: FE Analytics as at 31.12.20, C Accumulation share class performance. Quartile performance rankings as at 31.12.20, generated on 08.01.21.

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.