Liontrust Global Income Fund

June 2019 review

The Fund returned 4.2%* in sterling terms in June compared with a 4.4% average return from funds in the IA Global Equity Income sector.

 

Central bankers provided impetus for markets to bounce back from their wobble in May. The US Federal Reserve gave its strongest hint yet that it is ready to loosen its monetary policy. The bank dropped the word “patient” from its June policy statement, while noting that uncertainties have increased with regards to the outlook for inflation and economic growth. The Federal Open Market Committee will “act as appropriate to sustain the expansion”. According to futures markets, a rate cut in the next meeting in July is certain.

 

The Fed’s statement came after European Central Bank (ECB) President Mario Draghi indicated the possibility of extra monetary support for the eurozone. In a speech on 20 years of ECB monetary policy, Draghi highlighted that risks to the economic outlook remained tilted to the downside and if there isn’t an improvement then additional stimulus would be required. His speech sparked a rally in eurozone debt with the yield on German 10-year Bunds reaching a new record low.

 

Away from central banks, an escalation in geopolitical tensions saw a surge in oil prices in the second half of June. Iran was blamed for an attack on two oil tankers in the Gulf of Oman and the downing of a US reconnaissance drone. Trump said US aircrafts were en route to strike back against Iran, but he called off the attack at the last minute. The fears that this conflict could continue and potentially disrupt oil supply lines saw the price of Brent rise 11% in the second half of June. This supported shares in French energy giant Total (+7.9%) and Swedish oil and gas exploration company Lundin Petroleum (+13.2%). The price of gold, a traditional safe haven, meanwhile reached its highest price in over five years.

 

The MSCI World Index ended the month up 5.6%, with all sectors closing higher though there was a mild cyclical bias. The best performers in sterling terms were materials (+10.1%), IT (+8.1%) and consumer discretionary (+7.3%), while real estate (+1.5%), utilities (+3.3%) and communication services (+3.4%) were the biggest laggards.

 

Two of the Fund’s large cap miners Anglo American (+18.4%) and Rio Tinto (+7.6%) participated in the materials rally. The sector benefited from higher iron ore prices amid supply shortages and greater demand from China. Rio Tinto’s gains were restricted at the end of the month when it cut its full-year guidance for iron ore production to 320m-330m tonnes compared to previous guidance of 333m-343m tonnes. This was a result of challenges in its Pilbara operations in Western Australia causing a greater proportion of low grade products. 

 

An update from the Polish government that it will reduce the cap on non-interest cost of consumer loans to a flat 10%, from 25% hurt shares in International Personal Finance Group (-24.6%). The home credit provider noted that the proposals will need to be reviewed by the EU and it will seek a “more positive outcome”. The company added that it will update the market on the potential impact from the proposal, but the sizeable decline in its share price suggested that investors are expecting a significant blow.

 

We executed a number of changes to the portfolio as a result of our annual review of the published report & accounts of companies in our stock universe. In June, we exited positions in Altri SGPS, Barratt Developments, BGC Partners, BOC Hong Kong Holdings, Eutelsat, Glusking Sheff + Associates, ING Groep, Marks & Spencer Group, Navigator Co, Newmark Group, Nokian Renkaat, O2 Czech Republic, Resurs Holding, Spark New Zealand and UPM-Kymmene.

 

We opened positions in US biopharmaceutical companies AbbVie and Amgen, UK pharmaceutical company GlaxsoSmithKline, oil and gas companies Lundin Petroleum and Royal Dutch Shell ‘A’ shares and Norwegian telecoms operator Telenor.  

 

Positive contributors to performance included:

Anglo American (+18.4%), Seagate Technology (+13.5%) and Lundin Petroleum (+13.2%).

 

Negative contributors to performance included:

International Personal Finance (-24.6%), Ensign Energy Services (-11.4%) and Deutsche Pfandbriefbank (-5.3%).

 

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

 

 

Jun-19

Jun-18

Jun-17

Jun-16

Jun-15

Liontrust Global Income I Inc

4.6

6.0

18.5

7.5

-0.8

IA Global Equity Income

8.5

3.6

19.2

9.6

4.3

IA Global Equity Income

8.5

3.6

19.2

9.6

4.3

Quartile

4

2

3

3

4

 

*Source: Financial Express, as at 30.06.2019, 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 03.07.2019, 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, July 24, 2019, 2:32 PM