Liontrust Global Dividend Fund

December 2020 review

The Liontrust Global Dividend Fund returned 1.6% in the final month of the year, versus 1.8% from the MSCI World Index and 1.5% from the IA Global Equity Income sector. Importantly, after a difficult year for income investors we are pleased to report income generation was only down 9% from 2019.

During December, Contact Energy performed well over last 6 weeks, up almost 40% in this short time frame. One catalyst for this large move is the inclusion of this stock in the Standard & Poor’s Global Clean Energy Index with the company generating most of its electricity from hydroelectricity.

However, we see this stock price move as a recognition of the company’s high-quality balance sheet and strong competitive position in the New Zealand energy market. Whilst this is a large move for a utility infrastructure stock, the company remains attractive at this price, so we remain invested in the company.

Brookfield Asset Management has lagged the overall portfolio over the last month after announcing it will acquire all the units of its publicly traded real estate partnership Brookfield Property Partners (BPY) that it doesn’t already own for $5.9bn. We see this as a positive development for this market-leading infrastructure asset manager – and reflects its approach to long-term capital allocation strategy and focus on generating shareholder value.

What do we mean by that? Simply, the company makes large investments counter-cyclically in high quality long duration hard assets which, alongside operational excellence, leads to compounding intrinsic value or in this case retained earnings at around 20% p.a for decades.  So, we see this market event as an opportunity rather than a risk and have been adding to our position during this period of underperformance.

Recently, we have exited two positions within the portfolio – both have become consensus longs across growth and income portfolios and in our opinion the stock prices have departed from our estimate of intrinsic value. TSMC has benefited from a range of positive industry announcements over the last 6 months and, alongside Anta Sports, we believe significant optimism is now baked in.

Both companies remain Global Leaders, but we have decided to exit them following a strong run over the last 6 months that have pushed the stock prices of these companies up significantly in a short period of time. Just like some stocks in the US last year, investor capital seems to be flowing into a small cohort of emerging market stocks and both TSMC and Anta Sports have benefited from these flows.

We have entered a critical stage in the fight against Covid-19 – particularly the new variant. Crucial to this outcome is evidence that the AstraZeneca, Moderna and Pfizer vaccines are effective against new Covid variants. Thus far, we can be confident but any evidence to the contrary would see an immediate escalation in market volatility.

On a positive note, the Biden presidency and new structure of the Senate will provide investors with increased policy certainty over the next four years, so we see this as a positive development for markets.

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

 

 

Dec-20

Dec-19

Dec-18

Dec-17

Dec-16

Liontrust Global Dividend C Acc GBP

16.7

34.0

-5.2

6.9

11.1

MSCI World

12.3

22.7

-3.0

11.8

28.2

IA Global Equity Income

3.3

18.6

-5.8

10.4

23.2

Quartile

1

1

3

4

4

 

*Source: Financial Express, as at 31.12.20

 

**Source: Financial Express, as at 31.12.20

 

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.

Wednesday, January 20, 2021, 3:29 PM