Liontrust Global Income Fund

February 2018 review

The Fund returned -1.5%* in sterling terms in February compared with the -2.1% return from funds in the IA Global Equity Income sector.

 

The market weakness at the beginning of the month was a continuation of the events seen at the tail end of January. Sovereign bonds were sold as investors considered an improving outlook for the world economy and the likelihood of tighter monetary conditions. This was intensified by better-than-expected US labour market data in February which showed wages growing ahead of consensus estimates, fuelling higher inflation expectations.

 

In the UK, the Bank of England guided to a faster pace of interest rate increases as inflation creeps higher. The market now attributes c.70% probability to another 25 basis point rise in May (following the November 2017 rate increase which was the Bank’s first in over a decade). This is up from around 44% at the beginning of the month.

 

Negative sentiment fed into equity markets, which saw sharp declines as investors repriced their inflation and interest rate expectations. The MSCI World Index returned -1.1% in sterling terms, with most sectors ending lower. The worst performing sectors were energy (-7.0%), consumer staples (-4.4%) and real estate (-5.1%), while IT (+2.5%) was the sole sector to end higher. 

 

Though strength in the dollar following the robust US jobs report provided a headwind to performance, the Fund fared better than the IA Global Equity Income sector average. This was partly due to its South African holdings, which rose after political developments lifted the South African rand. The country’s president, Jacob Zuma stepped down from power amid allegations of corruption, helping lift the currency to its highest level against the US dollar in almost three years. The Fund’s South African holdings – RMB Holdings (+14.8%), Emira Property Fund (+9.9%) and Vodacom (+3.3%) – were all contributors to performance.

 

Away from South Africa, Australian building fixtures and fittings seller GWA Group (+18.2%) rose after releasing its half year results to end December 2017. Revenue rose 2% year-on-year while earnings before interest and taxes (EBIT) grew 7%. The company also revealed that it plans to divest its Doors & Access Systems business and focus on Bathrooms & Kitchens.

 

Nordic construction group Peab (+10.8%) saw its share price rise following an upbeat fourth quarter update. Group net sales increased 7.2% to SEK14.6bn, with growth from every business area helping to beat the consensus estimate of SEK14.2bn. Fourth quarter pre-tax profit also beat the market forecast coming in at SEK814m versus SEK781m.

 

There was little news on the main individual stock detractors, with most stocks falling in response to general market weakness. JB Hi-FI (-7.6%), the Australian home entertainment retailer, reported strong interim results with total sales improving 41% year-on-year  and EBIT growing 25%. However, the market was disappointed with guidance for full-year net profit after tax, which the company said would be between A$235m-A$240m, compared to the consensus forecast for A$232m-A$248m.

 

Positive contributors to performance included:

GWA Group (+18.2%), RMB Holding (+14.8%) and Peab (+10.8%).

 

Negative contributors to performance included:

Ensign Energy Services (-13.0%), Man Wah Holdings (-10.5%) and JB Hi-Fi (-7.6%).

 

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 28.02.2018, total return (net of fees and income reinvested), bid-to-bid, institutional 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. 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.

Thursday, March 15, 2018, 4:45 PM