Liontrust Global Income Fund

December 2018 review

The Fund returned -3.4%* in sterling terms in December compared with -6.0% average return from funds in the IA Global Equity Income sector.

 

Global stock markets failed to get into the festive spirit in the final month of 2018, with the MSCI World Index producing a sterling return of -7.4%, its worst monthly performance since February 2009. December started off in fairly positive fashion with China and the US agreeing a truce against any further escalation in trade war and commencing three months of negotiations. Though this meant trade tensions took a back seat, the themes which caused the poor stock market performance in October returned: concerns about global growth, tightening monetary policy and oil prices.

The latter saw a particularly volatile end to the year. Brent crude received a short-lived lift after Opec and Russia announced output curbs of 1.2 million barrels a day. However, investors still had worries about oversupply with US shale producers continuing to pump oil at record levels. Alongside this, uncertainty about the global economy drew into question the resilience of demand for the commodity. This resulted in Brent crude shedding 8.4% over the course of the month and ending 38% off its October high.

Investors also kept a close eye on the last central bank decisions of the year. The European Central Bank confirmed the end of its quantitative easing scheme and maintained guidance that interest rates are to stay unchanged until summer 2019. However, the market’s focus was on the US Federal Reserve which hiked interest rates for the fourth time in 2018 and lowered its estimation for rate hikes in 2019 to two from three. Following sharp stockmarket declines and soft economic data, some investors were hopeful of a stronger signal of a slowdown in monetary tightening. In this respect, the Fund’s underweight allocation to the US was beneficial as US stocks had a greater negative reaction to the Fed’s statement. In addition, suggestions that President Trump was ready to fire Fed Chair Jerome Powell further weighed on equities across the Atlantic.

The mood in markets was unsurprisingly risk off. All sectors of the MSCI World Index ended in the red in sterling terms, with energy (-9.5%), financials (-9.0%) and industrials (-8.3%) the worst hit.

The share prices of the majority of Fund holdings were driven by the overriding bearish sentiment in markets, rather than stock specific newsflow. The materials sector, however, did provide some positives for the Fund, with Anglo American (+11.6%) and Rio Tinto (+4.8%) both ending higher. The sector received a boost from hopes of a better trading relationship with the US and China. Anglo American also stated that its Minas-Rio iron ore project had resumed operations after a detailed technical inspection. Once operations are ramped up, the mining giant expects to produce 16-19 million tonnes of iron ore in 2019.

 

In December, we made one acquisition: Newmark Group, a US-based real estate company. The company was spun out from BGC Partners and the Fund received an allocation of shares.

 

Positive contributors to performance included:

 

Simplo Technology (+12.8%), Anglo American (+11.6%) and Endesa (+7.2%).

 

Negative contributors to performance included:

 

BGC Partners (-23.7%), Deutsche Pfandbriefbank (-15.6%) and Marks & Spencer Group (-15.5%).


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

 

 

Dec-18

Dec-17

Dec-16

Dec-15

Dec-14

Liontrust Global Income I Inc

-5.8

8.4

28.5

-4.4

0.5

IA Global Equity Income

-5.8

10.4

23.2

1.5

6.7

Quartile

3

3

1

4

4

 

*Source: Financial Express, as at 31.12.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 31.12.2018, total return (net of fees and income reinvested), bid-to-bid, primary class.

For a comprehensive list of common financial words and terms, see our glossary here.

 

Key Risks

 

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in Funds managed by the Cashflow Solution team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Liontrust European Growth Fund holds a concentrated portfolio of stocks, if the price of one of these stocks should move significantly, this may have a notable effect on the value of the respective portfolio. The Liontrust Global Income Fund's expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. 

 

Disclaimer

 

The information and opinions provided 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. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Wednesday, January 30, 2019, 10:08 AM