Liontrust Global Alpha Fund

Q4 2019 review

The Liontrust Global Alpha Fund returned 2.3%* over the quarter, meaning it outperformed the MSCI AC World Index, which returned 1.4%. However, the Fund narrowly underperformed relative to its average peer in the IA Flexible Investment sector which returned 2.8%.

 

Market Overview

Global equities enjoyed a strong quarter as recessionary fears subsided. The main driver behind this was an easing in trade tensions between the US and China, with a phase one trade deal between the two countries agreed towards the end of the quarter. As a result, global bond yields generally rose over the quarter. However, despite this improvement in investor sentiment, value stocks (having rebounded strongly in late Q3 2019), once again underperformed relative to growth stocks. Technology once again led global equities at a sector level, with healthcare stocks also delivering strong gains. The UK market was one of the strongest performing developed markets and this was largely driven by the general election result. Not only did the unexpectedly large Conservative Party majority end fears of a Corbyn-led Labour government, given the Tories’ more business-friendly policies, but it also created further certainty regarding the UK’s future relationship with the EU. However, the improved sentiment towards global growth also meant emerging markets outperformed developed markets over the quarter.

 

Portfolio Attribution

The Fund’s outperformance relative to the MSCI AC World Index can largely be attributed to our technology related positions. The sector had come under pressure in late Q3 as bond yields spiked, sparking a rather large rotation within the global equity market from growth to value. Many of our tech stocks were hit by the indiscriminate selling, and therefore much of the strong returns seen during the quarter can be viewed as mean reversion. The three strongest performers were Nvidia, RingCentral and Horizon Therapeutics. Nvidia’s strong performance was driven not only by a general improvement in sentiment towards semiconductors, but also the fact that it has created sustainable growth by creating and becoming the top brand in the GPU (graphics processing unit) category. Nvidia has moved beyond chips to be a platform company, while in the term, its cloud growth is improving. RingCentral’s outperformance was more stock specific, with the market reacting well to the news it had entered a partnership with Avaya, which has increased its total addressable market.

 

The largest detractors also included tech-related stocks, notably Twilio and Constellation Software, with both having fallen significantly at the beginning of the quarter as value rebounded, but both ended the year strongly as sentiment improved. Another detractor was CME Group, the futures exchange. The stock tends to perform strongest on a relative basis during periods of heightened volatility and uncertainty, thanks to the increased volumes it witnesses. Therefore, during a quarter when global equities rebounded and recession fears subsided, it was unsurprising the stock underperformed.

 

 

Outlook

We remain positive in our outlook for global markets. In our view, many of the headwinds that hurt equities in 2018 – such as slowing economic growth and trade war concerns – have receded. Global central banks were ahead of the curve with regards to decelerating growth and we believe the lagged impact of looser monetary policy will mean – barring an external shock – global growth will be 3.5% for 2020. We are therefore confident in our portfolio positioning as we believe this is a supportive backdrop for equities.

 

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

 

Dec-19

Dec-18

Dec-17

Dec-16

Dec-15

Liontrust Global Alpha C Acc

15.5

-1.0

25.3

6.5

1.9

MSCI AC World

21.7

-3.8

13.2

28.7

3.3

IA Flexible Investment

15.7

-6.7

11.2

13.8

2.0

Quartile

3

1

1

4

3

 

*Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)

 

**Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)

 

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 Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.

 

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.

Thursday, January 23, 2020, 3:51 PM