Liontrust Global Income Fund

April 2018 review

The Fund returned 4.6%* in sterling terms in April compared with the 3.8% return from funds in the IA Global Equity Income sector.

After a poor start to the year, global equities registered their first positive month since January, with the MSCI World Index rising 3.0% in sterling terms. This followed seemingly encouraging developments in the trade tensions between the US and China which had plagued the market in March. While China unveiled retaliatory tariffs of up to 25% on certain US imported goods following on from Trump’s announcements of Chinese import levies in March, there was more optimism that the two nations would avoid a trade war. 

Another source for the market’s gains was the rise in the oil price. North Sea benchmark Brent oil rose to US$75/barrel for the first time since late 2014 with Opec supply cuts continuing to have their intended impact of reducing global inventories and raising prices. Increasing geopolitical concerns also contributed to oil’s latest leg higher, with Trump signalling that he wants to withdraw the US from the Iran nuclear deal.

The rise in oil prices was reflected in the sector breakdown in the MSCI World Index where energy (+11.5%) was by far and away the largest contributor to the index’s performance. Total (+13.7%) was one of the Fund’s holdings to participate in the energy sector rally. 

The Fund’s outperformance versus the market was aided by its underweight positon in the US, a market which we see as overvalued. This was a tailwind in April as the US market lagged the gains in the rest of the world. 

One of the major developments in UK corporate news was the proposed merger between J Sainsbury (+29.4%) – a Fund holding – and Walmart-owned Asda. The deal, worth around US$10bn, would combine the second and third biggest UK grocers by market share, with a combined revenue of £51bn. However, the deal is likely to be reviewed by the UK competition regulator. 

Sberbank (-17.3%) was one of the main detractors from the Fund amid wider weakness in Russian equities and the ruble. This was due to fresh sanctions by the US against Russia after Trump criticised Russia for siding with Assad following an alleged chemical attack in Syria. 

Away from Russia, US personal care products maker Kimberly-Clark (-4.3%) declined in the run up to the publication of its first quarter results. Shares regained some ground following the release which showed the company delivered net sales growth of 5% year-on-year and an adjusted earnings-per-share of US$1.71, ahead of the consensus estimate of US$1.68. On a call following the results, however, Chief Operating Officer Michael Hsu noted that the pricing environment for Kimberly-Clark remains challenging and competitive. Nokian Renkaat (-5.4%), meanwhile, saw its shares ease after the resignation of its CFO, who had worked for the company for 20 years.

We are currently undertaking our annual review of companies’ reports and accounts, which drives the majority of portfolio changes within the Cashflow Solution fund range. However, the yield objective of the Income Fund makes it prudent to consider the dividend payment calendar of companies when managing the annual restructuring of the portfolio. Therefore portfolio changes are phased according to the timing of dividend receipts.

So far, this has seen Skandinaviska Enskilda Banken exit the Fund while Naxitis, Resurs Holding and Sberbank have been added.  

Positive contributors to performance included:
J Sainsbury (+29.4%), GWA Group (+14.7%) and Total (+13.7%).

Negative contributors to performance included:
Sberbank (-17.3%), Nokian Renkaat (-5.4%) and Kimberly-Clark (-4.3%).

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

 

Mar-18

Mar-17

Mar-16

Mar-15

Mar-14

Liontrust Global Income I Inc

2.3

24.8

-3.3

5.7

11.3

IA Global Equity Income

-1.4

25.4

-1.8

12.6

7.1

Quartile

2

3

4

4

1

*Source: Financial Express, as at 30.04.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.

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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. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Investment in the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates.  The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation.

Disclaimer

This content 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy.  It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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.


Friday, May 11, 2018, 4:55 PM