Liontrust Global Income Fund

August 2018 review

The Fund returned -0.8%* in sterling terms in August compared with 0.7% average return from funds in the IA Global Equity Income sector.

 

Investors were faced with a cocktail of concerns about emerging market economies and trade in August. The Turkish lira dived as Donald Trump tweeted that the US would be doubling its steel and aluminium tariffs on Turkey. This, combined with ongoing economic weakness highlighted by inflation running up to 15.9% in July, caused traders to sell out of the lira and other emerging market currencies. Argentina was another economy in distress, with the local currency falling 27% against the dollar causing the central bank to raise interest rates by 15 percentage points to 60%, the highest in the world.

 

While concerns about emerging market currencies weighed on most stock markets around the world, the S&P 500 continued its rally, reaching a new all-time high. The Fund’s low weighting to the US, a market which we believe is overvalued, was the main factor behind underperformance in August.

 

The S&P’s rally came despite the ongoing trade war rhetoric between the US and China, with Trump announcing an extra 25% tariffs on US$16bn worth of Chinese goods, to which the Chinese retaliated with similar measures. The US, meanwhile, announced a bilateral trade deal with Mexico, though Canada, the third member of Nafta, was left in the cold.

 

The MSCI World Index returned 2.2% in sterling terms. The rise was driven by IT firms with the sector producing a return of 7.9%. Health care (+4.3%) and consumer discretionary (+3.9%) were also strong performers, while energy (-2.1%) and materials (-1.8%) detracted.

 

Company results dominated the newsflow for Fund holdings. Ensign Energy Services (+19.3%) was one such stock as it reported consensus-beating second quarter revenue of C$263m and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of C$53m. In addition, the company took its C$470m approach for Trinidad Drilling hostile.

 

Construction and civil engineering group Peab (+13.1%) reported a pretax profit of SEK673bn in the second quarter of 2018, coming in ahead of the market estimate of SEK610m, with all areas of the business contributing to the profit line. The company added that it has a solid order backlog though the housing markets in Sweden and Norway are expected to slow in 2018.

 

Sberbank’s (-22.0%) drop was largely due to adverse macro conditions rather than stock specific news. The rouble sold off against the dollar after more sanctions were placed on Russia by the US, hurting the Russian bank’s shares. Vodacom (-18.6%) also fell due to currency depreciation, as the South African rand fell alongside other emerging market currencies.

 

The Navigator Company (-11.6%) received an unpleasant surprise from the US Commerce Department, which stated that it will impose a 37.34% anti-dumping duty for the period August 2015 – February 2017, having previously indicated that the duty would be 0%. The company estimated that the decision would have a €66m impact on EBITDA for the current year, though it has appealed.

 

Positive contributors to performance included:

Ensign Energy Services (+19.3%), BGC Partners (+19.0%) and Peab (+13.1%).

 

Negative contributors to performance included:

Sberbank (-22.0%), Vodacom Group (-18.6%) and The Navigator Company (-11.6%).

 

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

 

Jun-18

Jun-17

Jun-16

Jun-15

Jun-14

Liontrust Global Income I Inc

6.0

18.5

7.5

-0.8

14.5

IA Global Equity Income

3.6

19.2

9.6

4.3

9.6

Quartile

2

3

3

4

1

 

*Source: Financial Express, as at 31.08.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.

 

**Source: Financial Express, as at 30.06.2018, total return (net of fees and income reinvested), bid-to-bid, 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 Cashflow Solution team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Liontrust European Growth Fund holds a concentrated portfolio of stocks, if the price of one of these stocks should move significantly, this may have a notable effect on the value of the respective portfolio. The Liontrust Global Income Fund's expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation.  


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. 

Monday, September 17, 2018, 2:00 PM