Liontrust Global Income Fund

January 2020 review

The Fund returned -1.7%* in sterling terms in January compared with a -2.7% return by the MSCI ACWI High Dividend Yield Index and the -0.4% average return from funds in the IA Global Equity Income sector.

 

Despite US-Iran tensions triggered by an airstrike which killed Qasem Soleimani, global equity markets began 2020 on the front foot with US indices pushing to new all-time highs. Investor sentiment was buoyed by the mid-month signing of a ‘phase one’ trade deal between the US and China. As expected, the deal avoided any additional tariffs being levied, in return for some commitments on Chinese purchase of US goods and stricter intellectual property protection.

 

In the second half of the month markets reversed, primarily due to growing concern over an outbreak of coronavirus in the Wuhan district of China. By the end of the month the official death toll had topped 170 and cases had been confirmed outside of China, leading the World Health Organisation to declare an international public health emergency.

 

The global growth outlook had already been clouded by downgrades to forecasts from both the World Bank and IMF so investors began to fret over the economic impact of travel restrictions and other measures to tackle the outbreak.

 

Growth concerns were very apparent through a significant defensive tilt to market returns at the start of the year. The MSCI World Index saw a very strong showing from the utilities sector, up 6.3%. Commodity prices reacted swiftly to reflect concerns that Chinese demand would be affected by the coronavirus outbreak. The energy sector dropped 8.6% after a 12% fall in Brent crude prices while the materials sector lost 5.0%.

 

A number of the Fund’s weakest positions in January sit within the energy and materials sectors: Lundin Petroleum (-10.3%), Royal Dutch Shell (-10.8%), Total (-9.8%), Boliden (-9.9%), Anglo American (-8.6%) and Rio Tinto (-9.3%).

 

Gaztransport et Technigaz (+6.3%) specialises in liquified natural gas (LNG) containers for shipping and storage. It announced new orders to kit out eight vessels on behalf of Hyundai Heavy Industries and Hyundai Samho Heavy Industries.

Energias de Portugal (+16.1%) was a standout performer within a buoyant European utilities sector. Corporate announcements during January included details of a 19-year agreement for its renewables subsidiary to sell energy produced at Brazil’s Lagoa solar plant and a 50/50 joint venture with ENGIE targeting fixed and floating offshore wind projects.

Navient (+5.7%), an issuer of student loans in the US, released Q4 results that beat expectations and issued upbeat 2020 guidance.

A holiday sales update from US retailer Target (-13.2%) disappointed relative to expectations after weak sales in key categories such as electronics and toys. It now expects Q4 comparable sales growth to be in-line with its holiday period rate of 1.4%, well below the 3.8% consensus analyst forecast at the time. The company did however maintain its Q4 earnings per share guidance.

Fears over the impact of the coronavirus outbreak on global travel and trade hit some stocks harder than others. Among the Fund’s holdings, Carnival (-14.4%) shares took a hit, not due to the release of full year results during the month, but because of concerns over disruption to the cruise industry. Its Costa Smeralda ship was quarantined in Italy so that 6,000 passengers could be tested following a suspected case on board.

 

Positive contributors to performance included:

Energias de Portugal (+16.1%), Gaztransport et Technigaz (+6.3%) and Navient (+5.7%).

 

Negative contributors to performance included:

Carnival (-14.4%), Target (-13.2%) and Royal Dutch Shell (-10.8%).

 

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 31.01.20, 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.

Tuesday, February 11, 2020, 2:22 PM