Liontrust Global Dividend Fund

January 2020 review

The Fund returned 2.1%* in January compared with -0.6% from the MSCI AC World Index and -0.4% from the IA Global Equity Income sector.


After a year in which markets bounced back and extended into record territories, supported by loose monetary policy, it seemed only an exogenous event could slow markets. Enter the Novel Coronavirus, a possible black swan event. The black swan concept was first developed by Nassim Taleb to explain the disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations.


Let’s use this framework to assess the impact of the Coronavirus – the first order impacts include factory shutdown and its effect on global trade. In 2002 (the time of the SARS outbreak), China’s share in global merchandise trade was only 5.5% according to the World Trade Organisation but the share more than doubled to 11.8% in 2019.


In fact, the current halt in the Hubei province has already affected Hyundai Motor, which is reportedly planning to suspend its production line in South Korea due to a shortage in parts – alarming, but transitory in nature if the virus peaks in March or April.


Second order impacts, and more concerning, would be a shock to the Chinese financial system and the flow-on effect on Chinese consumer demand. Currently, the Chinese Government has shown evidence of effectively managing orderly exits of over-leveraged Chinese companies (zombie companies – typically state owned and backed) but an unanticipated demand shock could prove too difficult to handle. Over the next couple of months, this is what we will be watching closely.


Each quarter, we link core concepts of management science literature with our process. In the ground-breaking 1997 book “The Innovator’s Dilemma,” the late Clayton Christensen, a Harvard professor, outlined his theories about the impact of “disruptive innovation”. Assessing the impacts of disruption on an industry is cornerstone of the Global Equity team’s process.


The Innovator’s Dilemma can be defined as what a firm faces when the choices that once drove its success become those that destroy its future. The book outlines a blueprint for how to identify and respond to these disruptive forces as small, fast-moving, innovative companies can enter markets with disruptive products and services and grab large chunks of market share.


As an income investor, we tend to invest in the incumbent firms not the disruptors. A key characteristic we favour is companies that exhibit sustaining innovation, the ability to stave off new, more nimble competitors. One strategy employed by incumbent firms to insure against disruption is to purchase new entrants and integrate new knowledge and skills into its existing team. An example of this concept is the recent purchase of Placid by Visa for an eye-popping $5.3bn.


While, on first brush, the transaction appears expensive, this overlooks the technology and knowledge the company has acquired. In fact, the competitive advantage built by Placid is very similar to Visa’s, operating in the middle of a three-sided network as it enables communication between developers, new fin tech apps like Venmo, and banks.


We see this integration by Visa as an exciting strategic decision that reinforces its competitive position within the electronic payments market, enabling the company to continue to reinvest in its business and extend its economic moat – creating long-term capital and income growth for shareholders. 


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








Liontrust Global Dividend C Acc GBP












IA Global Equity Income













*Source: Financial Express, as at 31.01.2020, total return (net of fees and income reinvested), primary class.


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


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, February 13, 2020, 11:16 AM