Liontrust Global Income Fund

May 2019 review

The Fund returned -2.1%* in sterling terms in May compared with a -1.8% average return from funds in the IA Global Equity Income sector.

 

Global equities registered their first monthly decline of 2019, following a deterioration in relations between the US and China. Prior to May, it had seemed the two countries were edging towards a trade agreement after months of negotiation and a pause to tariff increases. However, talks broke down and President Trump moved to raise tariffs on US$200bn worth of Chinese goods to 25%. This escalated further as Trump signed an executive order blacklisting Chinese telecoms company Huawei. China retaliated by hiking tariffs on US$60bn worth of US goods.

 

The resurgence of trade hostilities weighed on market sentiment, sparking concerns about global growth once again. The previous bout of tariff increases by the US and China resulted in a cut to growth forecasts by institutions such as the World Bank and investors fretted that the latest protectionist measures could further derail global economic prospects.

 

The fear in the market resulted in greater demand for defensive assets. German 10-year bund yields turned negative again and hit their lowest levels on record, while safe haven currencies such as the Japanese yen and Swiss franc both rose. A similar split was seen on equity markets where there was a clear preference for defensive sectors. In the MSCI World Index, which registered a decline of 2.5%, utilities (+2.4%), health care (+0.9%) and consumer staples (+0.1%) were among the top performers along with real estate (+3.5%). IT (-5.4%), energy (-5.2%) and materials (-4.3%) made up the bottom of the list.

 

De La Rue (-30.5%) was the Fund’s biggest faller. The company stated that profit for its financial year 2020 is expected to be lower than its current year due to increasing strain on its bank note printing margins from competition. The company is in the midst of a transition towards security and product assurance and testing, and these segments of the group will provide some relief in the coming year. De La Rue also announced that its chief executive will be stepping down.

 

Marks & Spencer Group (-15.0%) saw its shares decline after announcing a 1 for 5 rights issue to fund its joint venture with grocery delivery company Ocado Group, which it announced in February. In its full-year results, the company recorded a 3% decline in revenue in the year to end March 2019. This was driven by a 3.6% fall in its UK Clothing & Home revenue which was hit by store closures. The company said it expects to continue its store closure programme, adding another 85 full line stores to the 35 it closed in the previous financial year.

 

Charter Hall Group (+7.0%) and Fortune REIT (+5.0%) did not release any corporate news, but participated in the rally in real estate stocks. The Fund also benefited from its overweight allocation to the utilities sector, with holdings EDP-Energias de Portugal (+5.1%), Endesa (+3.2%) and CEZ (+3.3%) all positively contributing to performance.

 

Shares in US retailer Target (+8.3) shot higher after encouraging first quarter results eased concerns about the impact from China tariffs. The group reported a 4.8% increase in comparable sales, coming in ahead of analyst estimates, while operating income rose 9.0%. Target expects second quarter sales to growth in the low-to-mid single digit range.

 

Positive contributors to performance included:

Target (+8.3%), Axfood (+8.1%) and Charter Hall Group (+7.0%).

 

Negative contributors to performance included:

De La Rue (-30.5%), The Navigator Company (-16.5%) and Las Vegas Sands (-15.3%).

 

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

 

 

Mar-19

Mar-18

Mar-17

Mar-16

Mar-15

Liontrust Global Income I Inc

4.7

2.3

24.8

-3.3

5.7

IA Global Equity Income

8.5

-1.4

25.4

-1.8

12.6

Quartile

4

2

3

4

4

 

*Source: Financial Express, as at 31.05.2019, 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 31.03.2019, 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. 

Monday, June 17, 2019, 2:35 PM