Liontrust Income Fund

The Liontrust Income Fund returned -1.0% over the quarter, versus the 4.5% return from its comparator benchmark, the FTSE All Share Index.

The UK market rose over the quarter, driven by strong performance from the banks, such as HSBC and Lloyds, as interest rates were expected to remain higher for longer, and defence stocks, such as BAE systems, due to a potential surge in defence spending from European countries. However, the domestic economic outlook remains challenging with continued consumer and business uncertainty post the budget. The return of a Trump presidency has added to this uncertainty. This has led to UK consumer exposed stocks, such as Greggs, Dunelm and Whitbread, underperforming.

From a sector perspective, underweight exposures to consumer staples and to basic materials contributed the most positively to relative performance. An overweight exposure to consumer discretionary and an underweight exposure to financials had the most significant negative impacts on relative performance.

Positive stock attribution

The most significant positive contributor to relative performance over the quarter was not holding Diageo, the multinational beverages company. Diageo had weak half-year results where their medium-term guidance was removed.

An underweight position in Glencore, the global mining company, was the second leading contributor to the fund’s returns. Glencore provided a disappointing copper production guidance at its full-year results.

Negative stock attribution

The most significant detractor from relative performance was an overweight position in Greggs, the leading UK food-to-go retailer. Greggs reported a slowdown in sales growth in its full-year results as the business has been impacted by a tougher consumer backdrop in the UK and continues to make investments for future growth, which will weigh on near-term margin progression.

The second most significant detractor from relative performance was an overweight in Dunelm, the UK leading homeware retailer. In a similar vein to Greggs, a tougher UK consumer backdrop has weighed on the company and resulted in second quarter sales that were weaker than expectations. However, it has continued to gain market share and strengthen its position in the homewares market.

Trading activity

We initiated new positions in MONY Group, Oxford Instruments and Renishaw in the quarter.

MONY Group is one of the leading price comparison companies. It is a highly cash-generative business, with a large proportion of this returned to shareholders, and it trades at an attractive valuation. The management team is evolving the business model to reduce its reliance on marketing spend for customer acquisition and to keep customers in the ecosystem, which should boost profitability.

Oxford Instruments is a leading player in high-end scientific instruments. It is a high quality, differentiated business exposed to structural growth drivers such as healthcare R&D, and a self-help opportunity in moving a division to profitability. Like other scientific instrumentation companies, Oxford Instruments has suffered some cyclical headwinds more recently but we think the medium-term opportunity is very attractive.

Renishaw is a world-leading engineering company specializing in precision measurement. The business is exposed to structurally growing end-markets such as robotics & automation, semiconductors and electronics.  These end-markets can be cyclical and this has weighed on the company’s sales and profitability. However, we believe these markets remain attractive longer-term and short-term uncertainty has enabled us to create an initial position in a world-class company.

We exited positions in 4imprint, B&M European Value Retail, Man Group, Spirent Communications, Glencore, Ashtead and BP on lowered relative conviction.

Outlook

The re-election of Donald Trump has increased economic uncertainty. The ‘Liberation’ day tariff announcement proved more severe than the markets had anticipated, triggering sharp selloffs across global equity markets. Tariffs are expected to increase the cost of doing business for companies and will weigh on consumer and corporate confidence. Closer to home, the UK faces its own set of challenges alongside these announcements.  The increase in employer National Insurance rates following Labour’s budget will be a direct cost headwind for UK businesses, especially those with high domestic exposure and labour-intensive models. We are assessing the extent to which companies can offset these cost headwinds through efficiency gains and pricing power. Our focus remains on constructing a well-balanced and diversified portfolio of advantaged businesses. Our confidence in the medium-term outlook for the portfolio comes from the excellent strategic, operational, and financial progress that the vast majority of the companies in the portfolio have made (and continue to make) over the last couple of years. Shorter-term risks remain high across markets.

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

*Source: Financial Express, as at 31.03.25, primary share class, total return, net of fees and income reinvested. 

KEY RISKS

Past performance does not predict future returns. You may get back less than you originally invested.

We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.

• 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.

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.

DISCLAIMER

This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.

It 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.

This information and analysis 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, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. 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.