Liontrust Global Income Fund

February 2020 review

The Fund returned -9.7%* in sterling terms in February compared with a -5.5% return by the MSCI ACWI High Dividend Yield Index and the -6.7% average return from funds in the IA Global Equity Income sector.

 

The month was dominated by reports documenting the spread of coronavirus and government actions to contain it. In February, cases of the disease outside of its origin in Wuhan became more frequent.

 

Investors focused on the potential impacts from the disruption caused by coronavirus on economic activity. Though little is still known about the disease, investors are anticipating a significant hit to the global economy and possibly significant stimulus from national authorities.

 

The result in markets was a broad-based sell-off in equities, while defensive safe havens such as gold and bonds saw greater interest. The most resilient sector in the MSCI World Index, in sterling terms, was communication services (-3.3%), while energy (-10.9%) and materials (-6.9%) were the worst hit areas. Commodity prices came under pressure as traders factored in the impact to demand from coronavirus. 

 

The Fund’s exposure to these two sectors weighed on returns. The likes of Royal Dutch Shell (-15.2%), Lukoil (-13.7%) and Rio Tinto (-11.7%) were among the heaviest fallers.

 

Cruise operator Carnival Corp (-20.9%) was one of the worst hit stocks from the coronavirus outbreak, as travel restrictions in China and elsewhere resulted in cancelations. The company issued an update stating that it expects coronavirus will have a material impact on its financial results, though would not be able to determine the full impact while the situation continues to evolve.

 

British Airways owner International Consolidated Airlines Group (-17.1%) and Air New Zealand (-19.8%) both warned of weaker demand resulting from coronavirus. IAG outlined flight suspensions to Beijing and Shanghai and reduced service in other Asian regions. The company withheld from issuing guidance for 2020 due to the uncertainty of the virus but highlighted the strength of its balance sheet and significant cash liquidity to cope with this challenging period.

 

Air New Zealand also suspended services to Shanghai and Seoul and said it would increase marketing efforts aimed at domestic markets. It added that it expected an earnings impact of NZ$35m-NZ$75m.

 

Away from coronavirus, Italian financial services company Unipol (-0.2%) reported strong full year results. Net profit rose 73% to 1.09bn, while its combined ratio declined to 93.7% from 94.4%, a sign of improved profitability. The group’s insurance business was a standout performer, with sales increasing 14% to €14bn, ahead of market estimates for €13.25bn.

Positive contributors to performance included:

There were no positive contributors during this period.

 

Negative contributors to performance included:

Carnival (-20.9%), Air New Zealand (-19.8%) and Navient (-19.2%).


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 31 December 2019. Its distributions over the 12 months to 31 December 2019 – expressed relative to the Fund’s price on 31 December 2018 – give a 12 month yield of 5.8%. The MSCI World Index yield on the same basis was 2.2%.

 

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

 

 

Dec-19

Dec-18

Dec-17

Dec-16

Dec-15

Liontrust Global Income I Inc

15.1

-5.8

8.4

28.5

-4.4

MSCI ACWI High Dividend Yield Index

19.1

-1.3

8.6

31.3

0.1

IA UK Equity Income

18.6

-5.8

10.4

23.2

1.5

Quartile

4

3

3

2

4

 

*Source: Financial Express, as at 29.02.20, 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 31.12.19, 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.

Thursday, March 12, 2020, 11:04 AM