Liontrust GF High Yield Bond Fund

The Fund (C5 sterling accumulation class) returned 1.5%* in sterling terms in Q1 2025 while the ICE Bank of America Merrill Lynch Global High Yield Index (GBP hedged) comparator benchmark returned 1.3% and the average return for the IA Sterling High Yield reference sector was 1.2%. The primary B5 US dollar share class returned 1.1%, while the ICE Bank of America Merrill Lynch Global High Yield Index (USD hedged) comparator benchmark returned 1.2% and the average return for the EAA Fund USD High Yield Bond (Morningstar) reference sector was 1.4%.

We also compare the Fund’s performance to a leading Global High Yield ETF (seeking to outperform by 1.5% a year) †. The Fund’s C5 sterling shares class return was slightly ahead of the ETF in Q1 and has now outperformed by over seven percentage points since inception (June 2018).

The global high yield market returned 1.23% (US dollar terms) in the first quarter of 2025. The US high yield market produced a 0.95% return. In Europe, the high yield market returned 1.02. BBs were best performing part of the market at 1.5%, with single B slightly behind, and a modest 0.25% return for CCCs. 

While the Fund outperformed its index over the quarter, there were no particular stand out credit stories in the quarter. 

The main change in portfolio shape was an increase in US dollar denominated bonds. The spread differential between Euro and US dollar high yield has for some time favoured Euro-denominated; however, this changed through the course of Q1, particularly in single B rated bonds. In the process of adding to US dollar bonds, we took positions in auto lending business Credit Acceptance (actually a former holding), energy midstream (which means it has limited direct oil price risk) company GLP and building services company Brundage Bone (also a former holding). It is also worth noting the growth in the fund during the period, with AUM now above $120mTrade activity.

Outlook

The timing of this quarterly commentary is significant given that, on day two of the new quarter, President Trump announced a new tariff regime for countries exporting to the US. The ongoing impact on global stock markets is for all to see. The high yield market has also seen volatility, but the drawdown at the market level so far has been ~25-30% of that seen in major equity indices, in line with what we would expect. 

Unsurprisingly, high yield bonds issued by cyclical companies have been most impacted, particularly autos. As a reminder, where we buy cyclical companies, we seek to avoid concentrations of thematic risk. Therefore, we do not have significant exposures to energy, mining, chemicals. The fund has around 4.9% in autos, all of which is in companies involved in the supply of parts. The largest individual position is Goodyear Tires, at 1.2%. The other four auto parts exposures in the Fund will be impacted, but we view them as resilient. Elsewhere, individual cyclical bonds are not part of a thematic exposure, i.e. are idiosyncratic and all have a few years before any refinancing. 

As an indication of stock specific risk in the Fund, the following table shows the ten highest yielding bonds in the fund as of 10th April. The top ten yielders account for11% of the Fund. There is a wide array of sectors, some cyclical, some not. Of course, this is not to say only the top ten yielding bonds have credit risk, but I think it’s a good way to illustrate the idiosyncratic nature of the fund. 

Ten highest yielding portfolio holdings

Source: Liontrust, UBS Delta. As at 31.03.25

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

Past performance does not predict future returns

*Source: Financial Express, C5 share class, total return, net of fees and interest reinvested. As at 31.03.25. The primary share class for this Fund is in US dollars (B5) but we are showing the C5 sterling-hedged class to compare against the IA Sterling High Yield sector. Discrete data is not available for ten full 12-month periods due to the launch date of the portfolio.
†While the managers of the Fund seek to outperform a leading Global High Yield ETF by 1.5% a year net of fees over rolling three years, this is not a formal objective. There can be no guarantees this will be achieved over the stated time period. The formal objective of the Fund can be found in the Prospectus. 

Key Features of the Liontrust GF High Yield Bond Fund

Notes: 1. As specified in the PRIIP KID of the fund; 2. SRI = Summary Risk Indicator. Please refer to the PRIIP KID for further detail on how this is calculated.

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.

The fund manager considers environmental, social and governance (""ESG"") characteristics of issuers when selecting investments for the Fund. 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. Low rated (high yield) or equivalent unrated debt securities of the type in which the Fund will invest generally offer a higher return than higher rated debt securities, but also are subject to greater risks that the issuer will default. The value of a bond would be significantly affected if the issuer either refused to pay or was unable to pay. Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund. The Fund can invest in derivatives. Derivatives are used to protect against currency, credit or interest rate moves or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions. The Fund uses derivative instruments that may result in higher cash levels. Cash may be deposited with several credit counterparties (e.g. international banks) or in short dated bonds. A credit risk arises should one or more of these counterparties be unable to return the deposited cash. The Fund invests in emerging markets which carries a higher risk than investment in more developed countries. This may result in higher volatility and larger drops in the value of the fund over the short term. The Fund may encounter liquidity constraints from time to time. Participation rates on advertised volumes could fall reflecting the less liquid nature of the current market conditions. Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails.

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.