Liontrust Global Income Fund

July 2018 review

The Fund returned 4.0%* in sterling terms in July compared with 3.6% average return from funds in the IA Global Equity Income sector.

 

Inevitably, trade war news was ever-present on front pages throughout July. President Trump imposed a tariff on US$34bn worth of Chinese imports, to which China retaliated with levies of its own. Throughout the month Trump signalled that he is willing to impose tariffs on up to US$500bn of Chinese goods. He also reserved some criticism for domestic targets, commenting in a CNBC interview that he was “not thrilled” and “not happy” about the US Federal Reserve’s current rate tightening cycle. A Q2 GDP release later in the month showed US economic growth accelerating to an annual rate of 4.1%.

 

Developments in the relationship between the US and Europe were more positive. Trump met with President of the European Commission Jean-Claude Junker and the pair reached an agreement to cease any further escalation of trade barriers and work to reducing the tariffs already in place.

 

The MSCI World Index registered a 3.8% return, despite a late month capitulation in some US tech stocks, which saw Facebook and Netflix – half of the much-vaunted FANG stocks – finish the month as the two biggest performance drags on the index.

 

The Fund’s financials sector holdings – around a third of the portfolio – accounted for almost half of its monthly gain in July. Four of these stocks registered double-digit percentage share price gains for the month.

 

Nordic lender Resurs Holdings (+21.4%) commented that it is “continuing to grow faster than the market in all countries” with lending rising 18% year-on-year to SEK26.6bn in the first half of 2018, well ahead of its own target of 10% growth. Operating profit grew by 10% to SEK374m.

 

Consumer credit provider International Personal Finance (+17.9%) rose after stating in a trading update that pre-tax profit for 2018 was set to be 10% ahead of consensus estimates following a stronger-than-expected performance by its European home credit businesses. Later in the month, it released full interim results which showed a 15% increase in pre-tax profit. 

 

An interim trading statement from Deutsche Pfandbriefbank (+12.4%) outlined a profit before tax expectation of €120m. The company continues to expect pressure on net interest income as well as an increase in administrative costs in the second half of the year. Nevertheless, it was able to raise its full year 2018 profit before tax guidance from €150m-€170m to €175m-€195m, sparking a rally in its share price.

 

Swedbank (+11.2%) referred to steady growth in mortgage lending volumes in Sweden, as well as increases in lending for its corporate and Baltic operations. Q2 net income of SEK6.0bn was up 12% year-on-year and above consensus analyst expectations of SEK5.2bn, boosted by a SEK677m gain from the sale of a business unit to credit information company Asiakastieto.

 

A couple of the Fund’s consumer sector stocks were responsible for negative contributions to performance. Hong Kong clothing retailer Giordano International (-9.5%) weakened ahead of interim results scheduled for August, while US-based Big5 Sporting Goods (-14.7%) reported weak Q2 sales. Same store sales fell 2.1% with gross margins also contracting to 31.4% from 32.5% a year earlier, pushing the company to a small net loss for the quarter. Management commented that the results were below its expectations due to a significant softening of sales in the second half of the quarter. The drop was blamed on unfavourable weather conditions which hurt sales of camping and water sports products.

 

Positive contributors to performance included:

Resurs Holding (+21.4%), Vodacom (+20.6%) and Deutsche Pfandbriefbank (+12.4%).

 

Negative contributors to performance included:

Big 5 Sporting Goods (-14.7%), Giordano International (-9.5%) and Seagate Technology (-6.3%).

 

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

 

Jun-18

Jun-17

Jun-16

Jun-15

Jun-14

Liontrust Global Income I Inc

6.0

18.5

7.5

-0.8

14.5

IA Global Equity Income

3.6

19.2

9.6

4.3

9.6

Quartile

2

3

3

4

1

 

*Source: Financial Express, as at 31.07.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.


**Source: Financial Express, as at 30.06.2018, total return (net of fees and income reinvested), bid-to-bid, primary class.


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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 Macro Thematic team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. The performance of the Liontrust GF Macro Equity Income Fund may differ from the performance of the Liontrust Macro Equity Income Fund and is likely to be lower than its corresponding Master Fund due to additional fees and expenses.


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. 

Monday, August 13, 2018, 10:36 AM