Liontrust Global Income Fund

August 2020 review

The Fund returned 3.5%* in sterling terms in August. The MSCI ACWI High Dividend Yield Index comparator benchmark returned 0.7% and the average return from funds in the IA Global Equity Income sector – also a comparator benchmark – was 2.2%.


July’s fall was seemingly just a blip in the extraordinary recovery seen in global equity markets since the initial coronavirus crash. From the market trough at the end of March, the MSCI World Index has returned 33% in sterling terms and hit a new record high at the end of August.


A large driver of these gains has been the significant monetary and fiscal stimulus from central banks and governments around the world. In August, Federal Reserve Chair Jerome Powell gave markets an indication that the monetary support will continue for some time yet. In a speech made during the Jackson Hole central bank summit, Powell said that the Fed will be more tolerant of temporary increases in inflation above its 2% target to ensure that average inflation continues to trend at 2% over time. This new policy, which Powell described as “flexible” average inflation targeting, will likely see interest rates remain at current rock bottom levels even if the US inflation starts to accelerate.


Cyclical sectors led the way in the MSCI World Index during August. Consumer discretionary (+9.9%), IT (+8.4%) and industrials (+6.5%) were the best performers, while utilities (-3.4%), energy (-0.5%) and health care (flat) were the worst performing sectors.


The Fund benefited from its overweight allocation to the consumer discretionary sector. Among the best performer was cruise operator Carnival (+28%), which saw some relief in its share price without releasing any material news. The same was the case for airliner International Consolidated Airline (+31%). Both have seen a substantial share price hit from the travel restrictions put in place around the world in response to the Covid-19 crisis.


Target Corp (+18%), meanwhile, has been fairly resilient throughout the crisis. The retailer’s share price hit a record high following its second quarter results, which revealed the company saw its strongest ever second quarter comparable sales growth (24%). Comparable digital sales continued to jump significantly higher; they almost trebled during the period and accounted for 13 percentage points of the headline growth. Surprisingly, store comparable sales also continued to perform well, growing 11%. This performance allowed the company to raise its second quarter dividend by 3.1%.


Advertising giant WPP (+14%) was less resilient to the fallout from the virus. Revenue declined 12% in the first half of the year, while operating margin was squeezed by 370 basis points to 8.2%. The company said customers have cut back on branding and identity spending and industry forecasts suggest a 12% decline in the global advertising economy. However, July trading has shown a steady improvement and, assuming there are no further macroeconomic setbacks, the company believes it will meet market forecasts for a 10-11% like-for-like decline in sales in 2020.


Telstra Corp’s (-10%) forecasts for its new financial year, however, missed analyst estimates. The Australian telecoms company expects total income in the year to 30 June 2021 to be A$23.2bn-A$25.1bn, below the consensus estimate of A$25.9bn, while underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) is expected to be A$6.5bn-A$7.0bn. These forecasts include an estimated A$400m negative impact on underlying EBITDA as a result of the Covid-19 pandemic.

Fellow Australian company GWA Group (-10%) was also one of the Fund’s worst performers. The bathrooms and kitchen product maker reported on a “very challenging year”, with adjusted EBIT falling 8% in the 12 months to 30 June 2020. The group estimates that Covid-19 related disruptions resulted in an A$8.6m hit during the year, while it also recorded a negative impact from lower construction activity and merchant destocking in the first quarter. It expects another tough year in 2021, with lead indicators pointing to a decline in the residential renovation segment, but the company maintained that its order book remained solid and larger than the previous year.


Positive contributors to performance included:

International Consolidated Airlines (+31%), Carnival (+28%) and Target Corp (+18%)


Negative contributors to performance included:

Emira Property Fund (-17%), Telstra Corp (-10%) and GWA Group (-10%).


The Fund has an income target benchmark of the yield on the MSCI World Index. The Fund’s most recent income distribution was announced on 30 June 2020. Its distributions over the 12 months to 30 June 2020 – expressed relative to the Fund’s price on 30 June 2019 – give a 12 month yield of 4.7%. The MSCI World Index yield on the same basis was 2.3%.

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








Liontrust Global Income I Inc






MSCI ACWI High Dividend Yield Index






IA Global Equity Income













*Source: Financial Express, as at 31.08.20, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.


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


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, September 17, 2020, 4:07 PM