Liontrust Global Dividend Fund

H1 2020 review

In the first half of 2020, the Liontrust Global Dividend Fund returned 2.0%, compared to the IA Global Equity Income sector average return of -6.3% and a 1.0% gain from the MSCI World Index*. This performance places the Fund in the top decile for performance for the period.


After an incredibly volatile market environment over the last four months we have returned to where we started almost 5 months ago, but the world has significantly changed. Valuation discipline is now more important than ever as narrative economics, popularised by Robert Shiller, has now taken over market sentiment.


In response, we continue to exit positions where price and value significantly dislocate, for instance we exited two technology holdings Lam Research and Amphenol in June. Whilst, we may miss some of the upside as stocks significantly diverge from reality due to market sentiment, we are happy exit positions as stocks hit our rolling three-year price target.


A key question as we reopen economies around the world is − how will industries change? One fact we do know so far is that demand within industries has tipped towards those companies with a digital footprint. But what about longer-term? In our opinion, companies with leading industry positions will have the opportunity to extend their competitive positions.


Fundamental characteristics such as balance sheet strength and market power significantly help, but a culture of innovation is what will enable these companies to pivot business models, develop new products and capture new economic profits as some industries are reshaped overnight. To us, a culture of innovation is a relentless focus on product improvement, customer-centric mentality, and disciplined investment in the business to drive further success. Let's just touch on one of these characteristics using Intuit, a portfolio holding, who has a relentless focus on product improvement.


Intuit, a recent investment, is the de facto standard in the US for consumer tax preparation and small business management software. Due to the nature of cloud accounting software, Intuit’s revenue has high recurring revenue and low marginal cost of revenue driving strong earnings growth. The opportunity for QuickBooks (Intuit’s small business accounting software) is outside of the US as the company expands beyond its dominant market position in the US accounting software market. As the company executes its growth plans, we expect the company to continue to increase dividends paid out to shareholder by ~15% per annum.


The company is an excellent example of one with a visionary leader who spotted the changing landscape in accounting software from off-the-shelve software packages to cloud SaaS products. Intuit with its relentless focus on product improvement quickly pivoted its business model and products to the cloud completely disrupting its core accounting products.


Intuit understands that true innovation starts with its own culture and is successful by overcoming fears of change, as well as empowering employees to implement change. The company actively seeks continuous transformation to build a future proof company – now it’s going after Sage and SAP’s fat profit pools in the small-to-medium-sized enterprises…. watch out European accounting stalwarts.


Why does this matter? Because over the past decade, Intuit has consistently shown when customer preferences change, the company can adapt and move with the market, whereas, competitors have been slow to respond.


Another recent investment, Brookfield Infrastructure Partners Company, is a Canadian infrastructure management company. The company stands out as the best-in-class infrastructure investor with clear KPI’s of 7-10% dividend growth and 12-15% total return.


The company achieves its objectives by investing in only the very best ideas and selling divisions or assets as they hit maturity. Essentially, driving a culture of innovation by allocating capital to those business leaders within the company driving the company forward. Examples of this range from seeding new investments in data centre infrastructure to selling South American utilities assets that have hit maturity.


With Q2 earnings lost, over the next month, the focus on the earnings calls will be on what the companies are doing to prepare for a more competitive landscape when we emerge. More specially, can those companies who have been slow to embrace digital transformation catch up? We maintain the view that many will be unable to catch up and global leading businesses will continue to extend their leadership positions.


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







Liontrust Global Dividend C Acc GBP






MSCI World






IA Global Equity Income













*Source: Financial Express, as at 30.06.20, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.06.20, total return (net of fees and income reinvested) 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 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.


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, July 16, 2020, 3:28 PM