Liontrust GF Global Dividend Fund

The Liontrust GF Global Dividend Fund continues to invest in innovative global leaders, buying companies on the right side of AI at cyclically depressed prices ahead of a new innovation cycle.

• In times of market uncertainty, fundamentals are almost the only thing that matter – because these are the only things we can be certain of.
• We remain highly confident in the fund’s prospects for 2025 and this earnings season so far is bolstering that confidence.
• Top contributors included Amphenol, Broadcom and Constellation Energy, while Thermo Fisher, UnitedHealth and LVHM were among the detractors.

Performance overview

The Liontrust GF Global Dividend Fund returned 0.9% in April in US dollar terms, in-line with the return of 0.9% from the MSCI World Index comparator benchmark.

Fund commentary

In times of market uncertainty, fundamentals are almost the only thing that matter – because these are the only things we can be certain of.  

The volatility provoked by Donald Trump's 'Liberation Day’ was unprecedented – the first week of April was the fifth worst selloff we have witnessed in 75 years and saw the VIX (volatility index) climb to levels not seen since Covid, when the economy was shut down, and the Global Financial Crisis. July to August 2024 saw a similar bout of volatility injected into markets, driven by a growth scare. Then, as we have seen in recent weeks, indiscriminate selling ensues and the companies that have done best get sold off hardest. We believe this dynamic will soon reverse – indeed, last week saw the start of this trend – because in a potentially slower macro environment, companies delivering decent earnings growth become scarce. Secular growth fuelled by innovation is where we want to be invested amid macro-uncertainty – in companies whose earnings growth momentum can be sustained. 

Uncertainty remains around trade policy, but tariffs are likely to cause some upwards pressure on inflation. Here, we want to be invested in companies that have pricing power and high gross margins – this is the hallmark of our innovators and the direct impact of tariffs for the majority of our companies is minimal, since they can pass on incremental costs. We are already hearing this from our early reporters this earnings season, which are maintaining or raising guidance despite tariff uncertainty. This is across sectors ranging from Danaher and Thermo Fisher in healthcare, Amphenol, LAM Research and TSMC in tech to L’Oréal in consumer. 

Arguably more important are the second-order implications of tariffs (i.e. demand erosion), so companies facing inelastic demand owing to demand/supply imbalances are in a strong position. This is really where our innovators excel, since they are offering the lowest cost or highest quality innovation on the market. A couple of notable comments from CEOs in the past week on earnings calls include those from TSMC, which is sold out well into this year and seeing no change in consumer behaviour, GE Vernova, whose order book stretches into 2029, and Amphenol, which would ship more to customers if it could. We expect this phenomenon to play out more broadly across the funds as earnings season progresses, since many of our companies are supply constrained not demand constrained.  

Finally and most importantly, the disconnect between our holdings’ fundamentals vs. their share price action is acute. This is why we remain highly confident in the funds’ prospects for 2025 and this earnings season so far is bolstering that confidence. Earnings power for our companies has changed little, or even strengthened, since the start of the year, yet share prices for many have moved in the opposite direction.

Strong fundamentals

The beginning of a new earnings season is underway, and against a backdrop of heightened uncertainty and macro volatility we continue to see evidence of strong business momentum and healthy fundamentals across the global leading innovators in our portfolio.

For example Amphenol was the top contributor to Fund performance in the month, shares climbing after the company delivered a monster 20% earnings beat matched by a 20% guidance raise. Earnings grew by 58% yoy, and orders by the same magnitude – underpinning durable and visible revenue streams well into next year. Amphenol has been one of our key top-ups across all three funds amid the past two months’ volatility.  

As the leading supplier of high-tech interconnects globally, Amphenol is an essential component of the electric backbone of the economy, enabling electrification across every industry from defence to industrials to autos to data centres. Growth was broad-based, but the latter is where we have seen continued outsized growth for five quarters, with no slowdown in sight.  

There has been much speculation and commentary around a looming digestion in data centre spend – Amphenol's results prove otherwise. Datacom growth for the company accelerated to 133% yoy in Q1 (up from 76% yoy growth in Q4), but the most astonishing number was sequential quarter-on-quarter growth of 34%. As the company’s CEO explained, its customers would buy more interconnect if Amphenol could ship more. It is supply constrained, not demand constrained. This is not digestion, this is acceleration – we believe the market has overly fixated and misinterpreted reports of Microsoft cancelling data centre leases, which we view as idiosyncratic (Azure is ceding competitive ground to Oracle as the cloud of choice for AI workloads). 

Amphenol is like the Constellation Software of electronics – margins are software-esque but this is a hardware company; de-centralisation is at the core of the business model, whilst accretive M&A reflects the Amphenol’s status as the preferred consolidator in this space. As such, the impact of tariffs is expected to be negligible: Amphenol has pricing power, faces a demand/supply imbalance, and has a devolved and high localised business structure purpose-built to adjust supply chains and manufacturing.  

With an earnings growth track record underpinned by strong fundamentals, the company appears well positioned for sustained top- and bottom-line growth in the years ahead.

Broadcom was another beneficiary of renewed optimism around the momentum of the AI infrastructure build-out, emerging as a top contributor to performance in April – a reversal of March fortunes, shares rallied to finish up nearly 15% for the month, a gain of over 30% from their recent low.

As the global leader in networking and custom ASIC semiconductor design, the company remains at the forefront of the AI revolution as customers embark on multi-year journeys to scale to clusters of 1 million XPUs to support next-generation models and AI propagation across the economy. This was evidenced in yet another strong update in March with AI revenues growing to $4.1 billion – up 77% year-on-year fuelled by demand for custom XPUs and AI networking solutions. Broadcom is scaling XPU cluster deployments at an aggressive pace to support the growing demands of hyperscaler AI infrastructure, with three existing hyperscaler clients (Alphabet, Meta, and ByteDance) projected to create a $60–$90 billion serviceable market for XPUs and networks by 2027. This momentum looks set to accelerate as the company capitalises on its first mover advantage in shifting to next-generation XPUs – the company unveiling the industry’s first 2-nanometer AI XPU featuring 3.5D packaging, a 15% performance improvement over leading 3 nanometre chips with a 25-35% reduction in power consumption.

This leadership is supporting continued new business wins, the company is now developing custom ASICS for four additional hyperscaler customers, with first tape-outs (the final stage of the design process) for two of these customers due later this year. The company also continues to enhance its networking solutions to support high-bandwidth AI workloads which require high-density, low-latency connectivity, ramping capacity for its existing Tomahawk 6 products while their next-gen Tomahawk 7 and Tomahawk 8 solutions are already in development. The company is also benefiting from operating leverage as it scales, with operating margins expanding and free cash generation ramping, positioning the company well for continued strong growth and returns in the years ahead.

Similarly, Constellation energy – a company we took the opportunity to top up during recent share price weakness – also rallied through the month. As we mentioned last month, the company continues to move from strength to strength as evidenced in a February update that beat expectations, EPS growing 38% thanks to strong operational performance and effective cost management across its leading nuclear fleet. As the most reliable form of energy, nuclear will be essential to meeting the surge in electricity demand from AI data centres, which is forecast to rise fifteen-fold by the end of the decade.

With the largest nuclear fleet in the US and best-in-class capacity factors underpinned by continued innovation and operational rigour, Constellation is well positioned at the forefront of this emerging structural trend. Further, its recent acquisition of Calpine meaningfully expands its strategy and long-term growth profile, increasing total generation capacity to 60 gigawatts (GW) and making it the leading provider of carbon-free power in the US. The deal highlights strong vision from the management team, diversifying the portfolio beyond nuclear by adding substantial natural gas, geothermal and renewable assets, and enhancing Constellation’s ability to serve large commercial customers across a broader geographic footprint – including increased exposure to the high-growth Texas market. Crucially, the gas assets complement the intermittency of renewables, providing the reliable, dispatchable energy supply valued by hyperscalers and data centres. Financially, the acquisition appears well executed – immediately accretive to both earnings and free cash flow – while a recent regulatory shift in favour of data-centre co-location further supports Constellation’s strong long-term outlook.

Similarly well positioned is NextEra – a company we initiated a position in early in the month. With the US power market needing an estimated 450GW of new generation capacity by the end of the decade, renewable energy and battery storage have emerged as the most cost-effective and readily deployable new generation solutions to plug this gap. NextEra is uniquely positioned here: as the largest generator of wind and solar power in the US, the company benefits from unmatched scale, vertical integration, and a 300GW development pipeline – half of which is already in the interconnect queue, giving the company a speed-to-market advantage.

This was evident in the company’s Q1 update, NextEra growing adjusted EPS by 9% year-on-year as it originated 3.2GW of new renewables and storage projects, achieving its largest quarter of solar origination on record. Execution appears strong, management highlighting minimal tariff exposure thanks to proactive supply chain actions and embedded contractual buffers. With a 28GW backlog, ramping demand, and tariff-hedged contractual access to low-cost battery technology management is confident in sustained earnings growth and a 10% dividend CAGR in the years ahead.

Energy opportunity: Global Datacentre power demand¹

Collapsing cost of solar energy²

Sources: 1) Semianalysis; [IRENA (2023); 2) Nemet (2009); Farmer and Lafrond (2016)…]

On the other hand, against a volatile backdrop, any miss in earnings was punished, as evidenced by key detractors to performance for the month. This included Thermo Fisher Scientific, the global leader in life sciences tools, diagnostics, and biopharma services. The company fell after lowering full-year profit guidance due to near-term impacts from new tariffs and US government policy changes, with the majority of its earnings call dedicated to breaking down these effects. Management is taking swift action through pricing adjustments, cost actions, and supply chain reconfiguration – measures it expects will largely offset the impact by next year.

Importantly, underlying performance remains sound: the company modestly beat across divisions, raised its dividend (for a 15% 5-year CAGR), repurchased $2 billion in shares, and continues to deploy capital into strategic M&A to round-out its portfolio. Thermo also continues to invest behind structural growth opportunities, including next-generation analytical instruments, proteomics platforms, and its integrated CDMO/CRO offering. Meanwhile, bioproduction demand continues to recover, Covid-related capacity has been successfully backfilled via fill/finish services, and management expects end-markets to return to long-term growth rates by late 2025. Thermo’s scale, decentralised structure, and deep commercial relationships provide meaningful flexibility in the face of disruption, and we retain confidence in its long-term positioning despite near-term headwinds.

By contrast, peer Danaher fared better through the month, with shares rising after a steady Q1 update and a constructive tone from management. While headline results were appear muted – core revenue growth flat and Life Sciences and Diagnostics declining year-on-year – the company delivered its seventh consecutive quarter of rising book-to-bill and raised full-year bioprocessing guidance to high-single digits. Tariffs were again a focus, but management emphasised its ability to deploy pricing, cost, and supply chain levers as needed.

As with Thermo, signs of recovery in bioproduction were evident, with large-pharma and CDMO consumables up double digits and early signs of a rebuild in equipment funnels. Danaher’s recent $2 billion capacity expansion in the US, including single-use technologies, further enhances its strategic optionality amid shifting trade dynamics. With strong cash generation, established operating prowess, and a proven M&A track record, the company appears well positioned to take advantage of a more supportive end-market cycle ahead.

UnitedHealth was another key detractor. We had substantially reduced our position ahead of earnings – taking profit as shares had a strong year-to-date run, up nearly 20% ahead of its mid-April earnings. This valuation discipline proved astute as shares fell after the company posted a disappointing update and guide largely due to an unexpected jump in senior healthcare utilisation in the US, with volumes roughly doubling in physician and outpatient settings particularly for elective procedures in the public-sector Medicare Advantage group. This jump correlated with recent premium hikes (in some cases rising from c.$50-$200), with retirees reacting by increasing utilisation of preventative care – a feeder of outpatient care. Management is assuming this elevated run-rate persists through 2026 and is embedding these assumptions into bid pricing to preserve margins.

While this reset in expectations was disappointing, we believe UnitedHealth’s long-term proposition remains intact, with the business model unchanged – as the largest health insurer in the US, UnitedHealth retains significant scale advantages and strategic differentiation through its vertically integrated model as payer, provider, and pharmacy benefit manager. Valuations still look attractive at current levels: even with earnings expectations now slashed for both ’25 and ’26, the company is trading on c.15x forward earnings – a 10-20% discount relative to historic levels.

As such, while the company is undoubtedly facing a difficult operating environment at present, we have opted to maintain our previously reduced position as we keep a close eye on management execution in the quarter ahead.

Similarly, LVMH was another key detractor for the month, the stock selling off alongside luxury peers as global uncertainty weighed on consumer sentiment and spending. The company’s Q1 update disappointed as organic sales fell slightly year-on-year, and while the global leader in luxury showed pockets of resilience – including continued strength in Europe, Watches & Jewellery, and brands such as Sephora and Tiffany – this was overshadowed by persistent softness in Chinese consumer demand and a slowdown in the US which impacted sales in the group’s key Fashion & Leather Goods division.

While macro conditions remain challenging, the group continues to execute well and we remain confident in LVMH’s ability to navigate the current environment. Management is responding with agility, tightening cost controls while continuing to invest in brand equity and product innovation across its global leading portfolio. As such we took the opportunity to top up our position, confident that the group’s proven leadership and structural advantages – unparalleled scale, vertical integration, and brand desirability – will allow it to emerge stronger as consumer sentiment stabilises.

In contrast, L’Oréal bucked the trend seen in other consumer names by posting strong organic growth, shares climbing double-digits as a result. While staples peers like Procter & Gamble, Nestle, PepsiCo and Unilever have flagged the difficulty of passing on inflated input costs without denting volume growth, L’Oréal – which sells ‘affordable luxuries’ that consumers tend to stick with in bad times as well as good – has proven more resilient, with strong pricing power that will help mitigate any tariff headwinds ahead. The CEO expects the global beauty market to grow at 4% this year, with L’Oréal to outperform as it continues to take market share through sustained innovation – the company invests more in R&D every year than its 3 closest peers combined, with 10-15% of revenue every year derived from new product innovation. Indeed, the company’s accelerated innovation ‘beauty stimulus plan’ is off to a promising start with strong Q1 contributions from new launches such as Kérastase Gloss Absolu and YSL Make Me Blush, helping drive strong share gains across geographies including a weakening US and strengthening China (North Asia growing +7% in Q1) – the latter which appears to be turning the corner as government stimulus takes hold. With strength in digital and online outpacing offline growth, the company looks set to compound its advantage through increasing data collection, feeding back into the company’s R&D machine – a flywheel which underpins the company’s impressive returns and 13% five-year dividend CAGR.

Dislocation presents opportunity

In periods of market volatility prompted by macroeconomic factors, we have been strategically increasing our holdings in the hardest‐hit investments across the fund. Accordingly, over the past couple of months we have raised our positions in companies across various sectors where upside opportunity has best emerged.

For example, we topped up Morgan Stanley during recent weakness, shares retrenching nearly 30% by early April from their recent high in spite of strengthening fundamentals. The was evident in the company’s April earnings update which marked its fifth consecutive ‘clean’ quarter, the company demonstrating that it can compound earnings even during periods of macro volatility. Q1 25 revenues of $17.7 billion, EPS of $2.60 and a 23% return on average tangible common shareholders' equity (ROTCE) set fresh records, driven by a $4.1 billion equity trading haul (-45 % YoY) and a further $94 billion of net new assets into Wealth Management. Crucially, these numbers were achieved while the firm added $2 billion to capital, lifting its CET1 ratio to a notably conservative 15.3 % – well above peer averages and already calibrated for Basel-end-game tweaks. 

The standout message from the earnings report was durability. Management stress-tested the revenue mix against a variety of “higher-volatility” scenarios and concluded that only a full risk-off episode (deal windows sealed shut, equity leverage slashed) would derail the run-rate. That is not today’s backdrop. Prime balances remain solid, clients are turning over stock at record clip and Asia – where Morgan Stanley & MUFG alliance gives rare local reach – produced its best quarter in seven years.  

The wealth engine looks equally supply-constrained. Total client assets now stand at $7.7 trillion; fee-based penetration keeps grinding higher (Q2 migration from workplace schemes added another ~$20 billion) and cash sweep balances have rebounded since quarter-end despite April’s market wobble. With only ~5 % of qualified assets in private alternatives against a 15% Global Investment Committee target, management sees a long runway for higher-margin product penetration. 

Finally, the investment banking “backlog” – remains intact, eagerly awaiting a change in sentiment. Sponsor activity is already back, while corporates are postponing rather than cancelling mandates until tariff contours become clearer. If policy uncertainty finds a floor, shareholders effectively own free upside: the advisory and underwriting cycle will restart with a capital-light cost base that has just been trimmed by a further 3% of headcount. In short, Morgan Stanley is emerging from a difficult period with both earnings momentum and balance sheet fire power to spare. 

We similarly topped up TSMC ahead of its April earnings, taking advantage of the DeepSeek and macro/tariff-inspired market uncertainty regarding a potential slowdown in the AI infrastructure buildout which had weighed on the shares – down nearly 40% from their January high to their April low. These concerns were summarily dismissed as the company posted a strong update showcasing a multi-year roadmap of ramping customer demand for the leading-edge chips it produces.

The company beat expectations in the quarter as revenues grew 42%, with high performance computing revenues growing by over 70%. Operating momentum remains strong, with the next-generation N2 node on track for volume production in H2 – expected to see stronger tape-out activity over the next two years than was seen for either of the past two generations of nodes. Management also reaffirmed full-year CAPEX guidance of $38-42 billion (supportive of semiconductor equipment players such as Lam Research and Applied Materials – both held), while giving colour on its overseas capacity expansion including plans for 30% of 2 nanometre capacity to be produced at its Arizona plant. With demand for leading-edge chips still outpacing supply and no change in customer behaviour as a result of recent tariff announcements, management raised their Q2 revenue guidance, reiterated their full-year guide for AI-related revenues to double, and outlined expectations for AI-related revenues to grow at a mid-40% CAGR over the next five years. With a long-term gross margin target of 53% and a 5-year dividend growth CAGR of c.10%, the company remains well positioned to continue to maintain strong earnings and dividend growth as its topline ramps in the years ahead.

We have also been establishing new positions across the Fund in companies that have long been on our watchlist, and where we have awaited a suitable market dislocation to initiate positions. For example, in addition to NextEra in April we re-initiated a position in Astra Zeneca after US tariff speculation triggered a sharp pullback in the shares, presenting an attractive entry point into a global leader in oncology, rare disease, and cardiovascular innovation with a best-in-class late-stage pipeline. Q1 results confirmed this opportunity, with strong underlying patient volume growth across key oncology assets, and impressive pipeline execution – the company securing 13 new approvals in the quarter and reporting five positive Phase 3 readouts. With ramping capacity (CAPEX to increase 50% in the year ahead to support growth) and over $10 billion in potential late-stage pipeline catalysts in 2025 alone, the company remains well positioned to drive sustained earnings growth as it continues to execute on its innovation-led strategy and scale its next wave of breakthrough medicines.

To finance these purchases, we have reduced a number holdings of which have performed well, and exited certain companies whose upside potential is no longer sufficient. In April this included trimming recent strong performers such as Walmart and UnitedHealth (ahead of earnings), while we exited our positions in Halma and Home Depot after they achieved our price targets. These companies move back to our watchlist where we will continue to monitor them for potential attractive entry points in the future.

Innovators remain well positioned for a new cycle

The evidence we have seen so far this earnings season has reinforced our confidence in the outlook for innovators across various sectors. These companies remain well‐positioned to benefit from the significant opportunities ahead. As sentiment, rather than fundamentals, has primarily driven the recent sell‐off, it has created an attractive entry point for those seeking to establish or expand positions, underscoring the importance of active management and valuation discipline during periods of volatility.

During such protracted periods of uncertainty it is critical to remain focused on the business fundamentals which underpin longer-term growth potential. We look to the ongoing earnings season and further research trips month ahead where we expect to see further evidence of innovative companies proving their resilience and adaptability, strengthening their competitive positioning against a difficult market backdrop. As always we will continue to maintain our valuation discipline, taking advantage of further market dislocations to invest in innovative companies at attractive prices.

Key Features of the Liontrust GF Global Dividend Fund

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.

• The Fund invests in global equities. The Fund may also invest in other eligible asset classes as detailed within the prospectus.
• The Fund considers environmental, social and governance (""ESG"") characteristics of companies.
• The Fund is categorised 6 primarily for its exposure to Global equities.The SRRI may not fully take into account the following risks:
  – that a company may fail thus reducing its value within the Fund;
  – 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, may in certain circumstances, invest in derivatives but it is not intended that their use will materially affect volatility. Derivatives are used to protect against currencies, credit and interest rate moves or for investment purposes. The use of derivatives may create leverage or gearing resulting in potentially greater volatility or fluctuations in the net asset value of the Fund. 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.
• Credit Counterparty Risk: 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.
• Liquidity Risk: 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.
• ESG Risk: there may be limitations to the availability, completeness or accuracy of ESG information from third-party providers, or inconsistencies in the consideration of ESG factors across different third party data providers, given the evolving nature of ESG.
• There may be times when those stocks that pay out higher levels of dividend underperform the market as a whole, or produce more volatile returns. 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.

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