Liontrust Global Income Fund

June 2018 review

The Fund returned -0.9%* in sterling terms in June compared with the flat average return from funds in the IA Global Equity Income sector.

 

The market’s focus returned to the threat of a trade war. China and the US were unable to come to a trade agreement and soon after negotiations ended, President Trump confirmed tariffs of 25% on US$50bn worth of Chinese imports. China outlined retaliatory actions and both sides threatened to increase these measures.

 

Amid this backdrop, the MSCI World Index made a return of 0.7% in sterling terms as investors fled to defensive areas of the market. Consumer staples (+3.5%) was the best performer in the MSCI World Index, with utilities (+2.9%) and health care (+2.1%) also top gainers.

 

There was also significant central bank news this month. The European Central Bank (ECB) unveiled plans to wind down quantitative easing. The bank stated that its monthly asset purchases will fall from €30bn to €15bn in September 2018 and then end in December 2018, though interest rates were unlikely to change until at least summer 2019.

 

The US Federal Reserve raised its target for the Fed Funds rate by 25bps to 1.75%-2.0%. The Federal Open Market Committee’s forecast of future interest rates showed it expects to hike rates twice more in 2018, once more than the guidance given in March. The move helped to push the dollar higher. The greenback also received a boost due to a strong jobs report, which showed the US economy added 223,000 jobs in May compared to the consensus estimate 188,000.

 

The strength in the dollar was a headwind for the Fund’s relative performance in June, given its considerable underweight position in the US. However, we maintain the view that US equities remain richly valued and continue to find more attractive opportunities elsewhere.

 

Individual company news was fairly thin this month. France’s Eutelsat Communications (+9.0%) was briefly involved in takeover news. It confirmed its interest in UK satellite company Inmarsat but immediately had a change of heart. This meant the company avoided engaging in a bidding war with US peer Echostar Corp.

 

Vodacom Group (-17.9%) announced a transaction worth up to 17.5bn rand with its black economic empowerment (BEE) partners, which will raise the South African telecoms group’s BEE ownership to 20%. Significant BEE ownership is part of the assessment criteria when bidding for spectrum.

 

We continued to phase in the changes from our annual review. Norwegian offshore drilling company Fred Olsen Energy, Australian electronics retailer JB Hi-Fi and UK supermarket J Sainsbury were all sold from the Fund. Swedish grocery company Axfood, British home credit company International Personal Finance and Spanish real estate company Merlin Properties were added.

 

Positive contributors to performance included:

Nutrien (+9.0%), Eutelsat Communications (+9.0%) and Genworth MI Canada (+5.9%)

 

Negative contributors to performance included:

Vodacom Group (-17.9%), Emira Property Fund (-13.5%) and GWA Group (-6.2%)

 

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 30.06.2018, total return (net of fees and income reinvested), bid-to-bid, institutional 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. 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.

Investment in the Fund 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.

Disclaimer

This content 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.  It contains information and analysis that 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 of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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, July 16, 2018, 4:22 PM