Liontrust Global Dividend Fund

Q1 2020 review

The Liontrust Global Dividend Fund returned -11.7% in the first quarter*, compared with -16.0% from the MSCI AC World Index and -17.9% from the IA Global Equity Income sector, placing the Fund in the top quartile for the period.

 

The portfolio has continued to hold up well in the sell-off, thanks largely to our exposure to companies with both strong balance sheets and pricing power, both of which are critical as the global economy went into lockdown. We subscribe to the notion that history never repeats but it often rhythms.

 

In this context we see the wild swings as firstly, investors trying to digest the stress applied to the financial markets (in our view, many are overreacting to this black swan event). Secondly, attempting to price in an uncertain future for the real economy. Timothy Geithner’s book titled “Stress Test” lays out an excellent framework for understanding the actions of the Federal Reserve to control financial contagion (first seen in the treasury market) that has now moved to the corporate bond market. 

 

The good news is the global financial system is well capitalised and works in a more co-ordinated manner now than at the beginning of the global financial crisis. Whilst we may not be at the bottom, we are getting closer and most the money made in an up market tends to happen in big one-day moves.

 

Importantly, we only invest in global leaders with strong balance sheets that enjoy a durable competitive advantage, so we are optimistic about the future of these well-capitalised businesses so are utilising the more recent market over-reactions to nibble at these stocks at discount prices.

 

As we enter the next phase of this crisis, the real economy is starting to show signs of strain with many companies rushing to scrap shareholder pay-outs on concern over the economic impact of the health crisis. So far, at least 80 companies in the Stoxx 600 Index have cancelled or delayed their dividends – in particular, companies with weak balance sheets exposed to liquidity concerns; therefore, we anticipate the focus to shift from dividend omissions to equity raises. We continue to remain optimistic about our portfolio holdings ability not only to return capital to shareholders but also grow the income distribution to investors this year.

 

So far, only one holding, Rightmove, has cut or removed its dividend. Still, we see this as an exception rather than a trend as we invest in well-capitalised companies with strong market positions and the ability to withstand the impending demand shocks. We remain fully invested and have started to see pockets of opportunity appear in our universe of Global Leaders after the sudden sell-off.

 

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

 

 

Mar-20

Mar-19

Mar-18

Mar-17

Mar-16

Liontrust Global Dividend C Acc GBP

5.0

15.6

-1.0

14.6

-6.9

MSCI AC World

-6.7

10.5

2.4

32.2

-1.2

IA Global Equity Income

-9.8

8.5

-1.4

25.4

-1.8

Quartile

1

1

2

4

4

 

*Source: FE Analytics as at 31.03.20

 

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.

Thursday, April 23, 2020, 3:21 PM