Liontrust Global Income Fund

October 2019 review

The Fund returned -2.2%* in sterling terms in October compared with a -1.8% return by the MSCI ACWI High Dividend Yield Index and the -2.0% average return from funds in the IA Global Equity Income sector.

 

The Fund’s most recent income distribution was announced on 30 June 2019, taking the Fund’s 12 month income yield to 5.0%. The Fund targets an income level in excess of the yield on the MSCI World Index. The index yielded 2.7% over the same period.

 

Equity markets began the month on unstable footing as traders reacted to poor US private sector payrolls data and further weakening in global manufacturing indicators. This added to ongoing trade war and Brexit uncertainties and resulted in a global stockmarket slump.

 

During the rest of October, stocks gradually clawed back some losses. There were some tentative signs of progress in the US and China trade talks, with US trade representatives stating they are close to finalising some sections of the “phase one” deal. There have been many false dawns when it comes to thawing trade relations between the two superpowers so investors were limited in their enthusiasm.

 

Brexit developments also caught the market’s attention. PM Johnson struck a deal with the EU and although he failed to get it ratified by parliament to meet the 31 October deadline, he was successful in securing a December general election. The pound rose as traders assessed that risks of a no deal Brexit receded, which in turn weighed on the MSCI ACWI High Dividend Yield’s returns in sterling terms.

 

Brexit and trade news fed into the US Federal Reserve’s decision to signal no further immediate monetary easing measures following a third interest rate cut in its October meeting. Chair Jerome Powell said that chances of a no deal Brexit have materially declined and the potential of phase one agreement with China has meant that the principal risks to global growth have subdued.

 

Telenor (-9.5%) was a one of the Fund’s weakest performers. The Norwegian telecoms company issued third quarter results which were largely in line with market expectations but highlighted difficult trading conditions in Pakistan, partly resulting from the re-introduction a local telecom tax. This meant that currency adjusted gross profit (excluding new acquisition DNA) declined by NKr800m.

 

Lukoil’s (+5.7%) update was particularly pleasing from an income point of view. The Russian oil company’s board approved a new dividend policy of at least 100% of the company’s adjusted free cash flow. The company said this will mean payouts are likely to be above historic levels.

 

Severstal’s (-9.6%) shares fell heavily alongside global markets at the start of the month and failed to recover even after the Russian steel company reported third quarter results ahead of analyst estimates. Earnings before interest, taxes, depreciation and amortisation rose 4.5% to US$787m versus the consensus estimate US$759m, while revenue came in-line with the market view of US$2.1bn. The company said global steel demand was supported by China but is weak elsewhere.

 

US personal care company Kimberly-Clark (-11.1%) also slipped despite reporting solid quarterly numbers. Net sales edged higher to US$4.6bn, while organic sales increased 4%, leading the company to raise full year organic sales growth guidance to 3%-4% from just 3% previously. However, with the shares already trading near all-time highs, it appeared the market had higher expectations.

We sold a residual position in International Personal Finance during October.

 

Positive contributors to performance included:

Deutsche Pfandbriefbank (+6.3%), Anglo American (+5.9%) and Lukoil (+5.7%).

 

Negative contributors to performance included:

GWA Group (-17.0%), Gaztransport et Techinigaz (-12.7%) and Kimberly-Clark (-11.1%).

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

 

 

Sep-19

Sep-18

Sep-17

Sep-16

Sep-15

Liontrust Global Income I Inc

3.2

6.3

10.4

25.8

-7.0

MSCI ACWI High Dividend Yield Index

10.7

8.3

10.8

33.7

-4.7

IA Global Equity Income

7.0

7.0

12.3

24.7

-2.7

Quartile

3

3

3

3

4

 

*Source: Financial Express, as at 31.10.2019, 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 30.09.2019, 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, November 18, 2019, 9:29 AM