Liontrust Global Income Fund

December 2017 review

The Fund returned 3.1%* in sterling terms in December compared with the 1.4% return from funds in the IA Global Equity Income sector.

 

Political developments once again captured investors’ interest in December. After months of negotiation, UK and European delegates settled on a Brexit divorce bill of €40bn-€60bn. This agreement was the main hurdle for the parties to begin trade talks, which are expected to start in 2018. In the US, equities rallied as Donald Trump won his first major legislative victory after his tax reform was narrowly passed through the US Senate and the House of Representatives.

 

Away from politics, the US Federal Reserve raised interest rates once again, taking its target to between 1.25% and 1.5%, in line with market expectations. Median forecasts from members of the Federal Open Market Committee indicated that they expect interest rates to rise three times in 2018, which would match the number of hikes seen in 2017.

 

Commodity prices rallied as the year came to a close. The price of copper reached its highest level in almost four years after data from China, the world’s biggest consumer of the metal, showed imports of refined copper increased 19% in November. Alongside energy (+4.4%), materials (+3.6%) was one of the strongest sectors in the MSCI World Index of developed markets. The Fund has good exposures to both sectors as they have been among the few areas of the market to show reasonable dispersion of share price valuation in the last 12 months. Rio Tinto (+12.6%) and Anglo American (+14.0%) showed the greatest participation in the commodity price rise.

 

The utilities sector (-5.0%) was by some margin the weakest in the MSCI World Index. Despite owning three utility companies, the Fund’s sector allocation made a positive contribution to returns. 

Another of the largest factors contributing to the Fund’s good monthly performance was the South African asset price strength which followed the election of Cyril Ramaphosa to lead the country’s ruling African National Congress party. The result was seen as market friendly, with Ramaphosa running on a platform of economic reform and anti-corruption measures. Positive sentiment was apparent through gains for the stockmarket, government bonds and the South African Rand, with the latter appreciating by more than 10%. The Fund has three holdings in South Africa – Vodacom Group (+10.9%), RMB Holdings (+18.3%) and Emira Property Fund (+12.3%). These positions benefitted from the currency appreciation as we do not hedge out currency risk in the Fund. We view currency fluctuations as likely to broadly even out across a portfolio over time, and to be subordinate in scale to stock specific, sector and style return factors.

 

Positive contributors to performance included:

RMB Holdings (+18.3%), Anglo American (+14.0%) and Rio Tinto (+12.6%).

 

Negative contributors to performance included:

VTech Holdings (-7.7%), BGC Partners (-7.5%) and Peab (-4.1%).

 

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

 

Dec-17

Dec-16

Dec-15

Dec-14

Dec-13

Liontrust Global Income I Inc

8.4

28.5

-4.4

0.5

23.3

IA Global Equity Income

10.4

23.2

1.5

6.7

20.4

Quartile

3

1

4

4

2

 

*Source: Financial Express, as at 31.12.2017, total return (net of fees and income reinvested), bid-to-bid, institutional 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. 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 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. 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.

Wednesday, January 10, 2018, 5:30 PM