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Liontrust Income Fund

Q4 2023 review
Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

Fund Net Return

Past Performance does not predict future returns

Fund:Liontrust Income Fund

Benchmark: FTSE All-ShareIndex

Q4: 3.7%

Q4: 3.2%

Source: Liontrust, as at 29 December 2023. Share Class C Acc, Net of Fees, GBP.

Performance Drivers Summary

The Fund outperformed its target benchmark over Q4. October was a torrid month for the fund and markets, with geopolitical issues in the Middle East exploding to the fore and government bond yields reaching a 16 year high. However, markets rebounded in November, despite ongoing macro uncertainty. December was also a strong month, with equity markets rallying post the ‘Fed Pivot’ early in the month.

UK equities were strong in Q4, in particular, UK small cap and mid-cap indices which outperformed the broader market. This was due in part to a growing focus on domestic companies, combined with the hope that interest rates had finally reached their peak. There was also renewed interest in UK businesses from outside the UK. However, the picture was more mixed for larger companies, with strong sterling and a weak US dollar restraining growth for some firms.

UK inflation continued to fall over the period, more sharply than many had expected. Meanwhile UK GDP rose 0.3% in November 2023, following a 0.3% drop in October. Fears of recession have weighed on markets for some time, but the UK economy has performed better than expected so far.

From a sector perspective, an overweight exposure to industrials and underweight to financials were the most supportive of the Fund’s performance but an overweight in communication services detracted the most.

The most significant contributors to performance were holdings in the online financial trading firm IG; Admiral, the financial services group; and Mears, the housing and social care provider.

FTSE250 company IG was set up in 1974 but the London-headquartered business now operates in 19 countries across five continents. In October IG announced it would cull its workforce by around 10% as part of a cost-cutting drive with the aim of saving £50 million a year. However, the company is highly profitable, with revenues rising above £1 billion for the first time in 2023. It is expected to report net profit margins of 35% for 2023 and has a target growth rate of 10% over the medium term.

Admiral is a well-known brand in UK motor insurance and the #1 by market share, but it also writes business in UK household, travel and pet insurance. It has exposure to the US and European markets and a blossoming UK loans business, which has synergies with the core UK motor business. The shares have performed strongly as the motor insurance pricing cycle started to inflect higher, following a period of elevated claims inflation that impacted margins.

The most significant detractors from performance included 4imprint, a marketer of promotional merchandise, and mining company Anglo American.

Despite delivering upgrades to consensus expectations, 4imprint shares fell in Q3 after the firm’s management flagged macro uncertainty – typically a sell sign for a historically cyclical business such as this. However, while it has continued to lag in performance, we believe the business has developed such a large pricing and service quality gap to its competitors – and has fundamentally shifted its cost structure (more variable digital marketing versus historically fixed cost print) – that its earnings should be less cyclical going forward. We therefore see investor concern as an overreaction.

Anglo American was a repeat offender, underperforming throughout much of 2023, and with its share price falling by more than 15% in December alone. This followed the company issuing a warning that its production outlook would be weaker than expected due to problems at its mines in Peru and Chile. With its share price down nearly 45% over the course of 2023, Anglo American could well become a takeover target and we have now switched our exposure to Rio Tinto.



Allocation (%)

Contribution to Return (%)


Top 5 quarterly contributors to return


IG Group



Revenues rose above £1 billion

Admiral Group



Strong performance on policy pricing trends

Mears Group



Ongoing re-rating plus good operational momentum

ConvaTec Group



Strong organic sales momentum; bullish feedback

Watches of Switzerland



Ambitious and reassuring long range plan for the business




Allocation (%)

Contribution to Return (%)


Bottom 5 quarterly contributors to return


4imprint Group



Management warning of macro uncertainty

Anglo American



Warning of reduced production outlook

Rentokil Initial



Soft third quarter update




Oil price weakness




Poor market share trends

Source: Liontrust, Liontrust Income Fund as at 30 September 2023


It is likely to be another volatile year ahead. A general election seems probable towards the end of the year but certainly by January 2025 at the latest. While inflation has been falling in recent months, geopolitical events including ongoing unrest in the Middle East and targets on international shipping vessels could push inflation back upwards. If inflation rises then interest rates – which had been widely expected to fall in 2024 – could remain constant or even go up as the government looks to restrain inflation.

Yet whether it’s the general election, pension reforms, or even footballing success at Euro 2024 – we can but hope – or even some other unforeseen macro event, we believe that when a catalyst does emerge the UK market could have a lot of running room.

In our view UK stocks continue to trade at significant discounts – the ongoing hangover of international investors avoiding the UK since Brexit in 2016 and latterly, with the period of acute political upheaval in the UK leading to uncertainty.

We don’t know when this valuation discount will end and the trend reverse, but we do believe that investing in stocks at a discount, many of which are businesses with globally-sourced earnings, shifts the odds of attractive total future returns further in our favour.

From lower starting valuations, two attractive pathways for future returns are possible. We will control what we can by reinvesting dividends to compound the portfolio NAV at attractive rates of return. Meanwhile, of course, the possibility of accelerated returns remains intact should the UK market revert to more fundamentally justified levels at some point in the future.

Understand common financial words and terms See our glossary

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.

Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result; The creditworthiness of a bond issuer may also affect that bond's value. Bonds that produce a higher level of income usually also carry greater risk as such bond issuers may have difficulty in paying their debts. The value of a bond would be significantly affected if the issuer either refused to pay or was unable to pay. This Fund may have a concentrated portfolio, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the Fund's value than if it held a larger number of investments. The Fund may encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings. Outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties (e.g. International banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails. The level of income is not guaranteed.


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.

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