Liontrust Global Income Fund

September 2018 review

The Fund returned -0.7%* in sterling terms in September compared with -0.2% average return from funds in the IA Global Equity Income sector.

 

Persistent concerns about trade wars and emerging markets meant that global equities started off on the back foot in September. Donald Trump continued to threaten China with tariffs of up to 25% on around US$200bn of Chinese imports, while China stood ready to retaliate. As has been the trend recently, this rhetoric was followed by action later in the month, though the US tariffs implemented on Chinese goods was only 10%. China’s reaction was to slap tariffs of between 5-10% on US$60bn of US imports.

 

Meanwhile, the further tightening of global monetary policy resulted in the ongoing weakness in emerging market currencies, as the dollar ploughed higher. The Turkish lira found some welcome relief, however, as its central bank hiked its one week repo rate to 24% from 17.75%, which was greater than the market’s expectations. There was also another round of monetary tightening by the US Federal Reserve, which raised rates once again in September to a range of 2.00% to 2.25%. The US central bank remains on course to raise rates again in December and signalled three more hikes in 2019.

 

There was a strong bounce back in stocks in the second half of the month. Energy (+2.4%) was the best performing sector in the MSCI World Index in sterling terms, as oil prices rose to four year highs. This came after Saudi Arabia and other major oil producing nations decided against raising crude production. Stocks in the telecoms sector (+1.6%) were also strong gainers, as was health care (+1.4%). Real estate (-2.8%), finance (-1.1%) and IT (-1.0%) were the biggest fallers.

 

The S&P 500 once again reached a new record high in September, which helped the MSCI World Index end up 0.2% in sterling terms during the month. The Fund’s low weighting to the US market was therefore a headwind this month.

 

However, Eastern Europe was an area of positive attribution. Sberbank of Russia (+16.1%) was one of the stand-out stocks. The company’s share price has recently tracked geopolitical events closely and this time it was buoyed by signs that the US Senate is leaning against restricting Russian banks’ dollar transactions. Though a decision has yet to be made, the softening in stance was enough to boost Sberbank shares

 

Russian energy company Lukoil (+10.5) rallied alongside other energy stocks as oil prices rose. French oil major Total (+4.4%) was another portfolio holding to benefit. Meanwhile, mining stocks Anglo American (+11.8%) and Severstal (+6.5%) both saw increases in their share prices as the materials sector was boosted on relief that tariffs imposed by the US and China were lower than expected.

 

Shares in Canadian wealth manager Gluskin Sheff + Associates (-10.6%) declined following the release of fourth quarter results. The company saw an increase in assets under management of C$154m to C$9.1bn, but earnings per share of C$0.19 fell below analyst consensus of C$0.24. The revenue figure, however, came in line with consensus at C$29.9m versus the C$29.4m forecast.

 

We exited positions in Bezeq the Israeli Telecoms Corp and Big 5 Sporting Goods as both showed evidence of a deterioration in their cash flow characteristics.

Positive contributors to performance included:

Sberbank of Russia (+16.1%), Anglo American (+11.8%) and Lukoil (+10.5%).

 

Negative contributors to performance included:

Seagate Technology (-11.0%), Gluskin Sheff + Associates (-10.6%) and Las Vegas Sands (-8.8%).

 

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

 

 

Sep-18

Sep-17

Sep-16

Sep-15

Sep-14

Liontrust Global Income I Inc

6.3

10.4

25.8

-7.0

6.7

IA Global Equity Income

7.0

12.3

24.7

-2.7

8.8

Quartile

3

3

3

4

4

 

*Source: Financial Express, as at 30.09.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.

 

**Source: Financial Express, as at 30.09.2018, 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, October 22, 2018, 5:10 PM