Liontrust Income Fund

The Liontrust Income Fund returned 7.2% over the quarter, versus the 4.4% return from its comparator benchmark, the FTSE All Share Index.

The UK market rose over the quarter, recovering from an initial sell-off triggered by President Trump’s ‘Liberation Day’ announcement. The initial market turbulence eased after a temporary suspension of most tariffs and the announcement of several new trade deals, with the UK the first country to benefit. Market strength was driven by strong performance in industrials such as BAE systems and Rolls-Royce, reflecting optimism around increased defence spending and tariff relief. In contrast, healthcare stocks struggled due to policy proposals by the Trump administration.

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

Positive stock attribution

The most significant positive contributor to relative performance over the quarter was an overweight in Dunelm, the home furnishings retailer. Dunelm had strong Q3 results where revenue came in ahead of expectations.

An overweight position in AJ Bell, the investment platform, was the second leading contributor to the fund’s returns. AJ Bell’s profit beat expectations at its HY results and it upgraded its guidance.

Negative stock attribution

The most significant detractor from relative performance was not holding Rolls Royce, the aerospace company. The shares performed strongly due to tariff relief and continued strength in its aerospace division, driven by defence optimism and strong civil aviation demand.

The second most significant detractor from relative performance was an overweight position in Thermo Fisher Scientific, the US life sciences and clinical research company. Its 2025 guidance was lowered because of US-China tariffs and US policy changes.

Trading activity

We initiated new positions in Trainline and Marshalls.

Trainline is an online rail ticketing platform. It has a leading position in the UK online market, and online sales are becoming a bigger proportion of ticket sales. They are expanding into Europe, where the liberalization of rail networks is allowing multi-operator competition. Political uncertainty has weighed on the shares and created an attractive entry point into a market-leading platform.

Marshalls is a UK manufacturer of landscaping, building and roofing products. While landscaping volumes are down over 30% from their peak and profits are almost 80% down, we believe there is significant recovery potential within the division. The building products division also offers recovery potential, with volumes down around 25%. Meanwhile, the roofing business continues to perform extremely well and is one of the best performing businesses in the industry. We believe that there is huge earnings recovery potential for the business with volumes close to all-time lows and an attractive valuation. 

We exited our position in LondonMetric Property due to lowered relative conviction.

Outlook

There are several cross-currents facing global businesses at present – a highly volatile geopolitical and tariff environment, an unusually changeable FX market, supply chain reconfigurations away from a dependence on China, and an uncertain consumer environment. At best this presents a challenging environment for businesses to navigate and one in which we imagine the confidence is not there for many businesses to invest.

From a UK consumer perspective, the outlook is mixed – consumer confidence is weak, despite relatively strong real wage growth, and UK unemployment hit a four year high in June.  Companies are reporting a mixed picture: UK banks see stable credit conditions and value-focused retailers like Greggs, Primark (AB Foods), and B&M have issued cautious updates. The bond market has woken up to the debt burden in both the UK and the US, and in the UK the Labour party looks to now need to go down the route of future tax rises. The consumer balance sheet seems strong, which should provide support to spending when confidence eventually picks up, but on aggregate consumers remain hesitant to convert this to spending.

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 30.06.25, 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.