Liontrust Global Income Fund

July 2019 review

The Fund returned 1.8%* in sterling terms in July compared with a 4.0% average return from funds in the IA Global Equity Income sector.


The Fund’s most recent income distribution was announced on 30 June 2019, taking the Fund’s 12 month income yield to 5.0%. The Fund targets an income level in excess of the yield on the MSCI World Index. The index yielded 2.7% over the same period.


Central banks continued to be at the forefront of market moves. The Federal Reserve promised in June to act as appropriate to sustain the US economic expansion and in July the policy-setting committee deemed that a 25 basis point cut was necessary. This move – the Bank’s first interest rate cut in over a decade – was entirely priced in by markets though there was some outside hope for a 50 basis point cut.


Some investors were therefore disappointed to hear that the July cut was a “mid-cycle adjustment to policy” rather than the start to another series of rate reductions. According to futures markets, three further rate cuts were priced in for the next 12 months.


There are now also expectations that the European Central Bank (ECB) will lower rates. The Bank adjusted the wording in its July policy statement to declare that rates will remain at present or lower levels at least through the first half of 2020. ECB President Mario Draghi added in his press conference that there are greater expectations for lower inflation and the Governing Council discussed a range of stimulus options including rate cuts.


The MSCI World Index ended the month 4.5% higher, with US stocks rising to record highs in the run up to the Fed decision. All sectors in the index ended higher, with IT (+6.9%) the best performer, followed by communication services (+6.8%) and consumer staples (+5.5%).


Materials (+1.8%) was one of the laggards and presented a relative headwind for the Fund, given its overweight allocation. Global mining groups Rio Tinto (-3.7%) and Anglo American (-9.2%) were among the fallers. Anglo American released interim results which showed underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 19% in the first half of 2019, while revenue increased 8%. The improvement in underlying EBITDA margins to 46% from 41% was due to strong prices for iron ore and platinum group metals. Anglo unveiled a larger than expected share buyback of US$1bn in addition to its improved dividend of US$0.62. However, the group’s share price declined after a major shareholder chose to unwind his investment.


Shares in Hong Kong-listed apparel retailer Giordano International (-18.1%) also came under pressure after it warned that it expects to see a 28% decrease in underlying operating performance in the six months to 30 June 2019. The company said that the poor performance was largely confined to its Greater China operations and cited poor market sentiment as a result of US-China trade tensions as the reason behind the weakness.


There was more positive news from Swedish food retailer Axfood (+11.5%). The company’s second quarter operating income came in 2.8% ahead of consensus while net sales also beat the market forecast. Sales growth was led by discount grocery chain Willys and wholesale business Axfood Snabbgross.


Pharma giant GlaxoSmithKline (+8.0%) issued improved guidance on the back of strong second quarter sales from its vaccines business. Group sales increased 5% at constant exchange rates and adjusted earnings per share (EPS) rose to 30.5p from 28.1p in the previous year. As a result of the robust operating performance, management now expects adjusted EPS to decline by 5% in 2019 compared to previous guidance indicating a 9% fall.


International Personal Finance (-17.0%) continued its recent share price decline following the Polish government’s proposal in June to lower the existing cap on non-interest loan costs. In July, the home credit company’s interim results showed a slight drop in interim pre-tax profit, though revenue increased 7%. Its Mexico business saw pre-tax profit halve, with lower-than-expected agent collections and a softening macroeconomic backdrop taking a toll.


There were a number of sales from the portfolio: Abbvie, CEZ, De La Rue, Ensign Energy Services, Peab and Philip Morris. A position in Hong Kong listed toll road management company Yuexiu Transport infrastructure was initiated.


Positive contributors to performance included:

Genworth MI Canada (+21.7%), Axfood (+11.5%) and Vtech Holdings (+8.1%).


Negative contributors to performance included:

Giordano International (-18.1%), International Personal Finance (-15.5%) and Anglo American (-9.2%).


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








Liontrust Global Income I Inc






MSCI ACWI High Dividend Yield






IA Global Equity Income













*Source: Financial Express, as at 31.07.2019, 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 03.07.2019, 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. 


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.

Wednesday, August 14, 2019, 3:57 PM