Liontrust Global Income Fund

July 2020 review

The Fund returned -2.8%* in sterling terms in July. The MSCI ACWI High Dividend Yield Index comparator benchmark returned -2.6% and the average return from funds in the IA Global Equity Income sector – also a comparator benchmark – was -0.9%.


Investors were perturbed by the surge in Covid-19 infections in the US, particularly in southern and western states like Florida and California, forcing President Trump to admit the outbreak would “get worse before it gets better”. An initial estimate of the US economy in Q2 showed a 9.5% year-on-year contraction. The Federal Reserve’s rate-setting meeting saw rates held close to zero and emergency lending facilities extended. With coronavirus concerns clouding the outlook for economic recovery, the US dollar slid to a two-year low; the Dollar Index dropped by more than 4% in July.

There were also signs of a resurgence in coronavirus infections in China during July, as its economy continued to recover from the first wave; China’s GDP grew 3.2% year-on-year in Q2. 

In Europe, sentiment was boosted by a €750bn post-pandemic recovery fund that was agreed at a summit of EU leaders, the longest since 2000. This came against a backdrop of downgraded economic expectations as the European Commission cut its EU economic growth forecast to -8.3% this year, worse than its previous estimate of -7.4%. It also trimmed its predicted recovery in 2021 from 6.1% to 5.8%. The commission cited a more gradual lifting of containment measures than it had expected.

Within the MSCI World Index of developed markets, the energy sector was an outlier – falling by 9.1%. It has now lost nearly 40% year-to-date. Financials (-3.3%) was the next weakest sector in July, while materials (+1.5%) and consumer discretionary (+1.4%) rose the most.


Gaztransport et Technigas (+14%) announced a number of new order wins in July, including an agreement with Chinese shipyard HudongZhonghua Shipbuilding for the tank design of three new LNG carriers. It also released interim results showing a near doubling of operating profit to 133m after a 66% increase in sales to 204m. The sales increase was driven by a sharp rise in work for LNG carriers. It now has an order book comprising €832m in revenues over the next three years made up of 135 units of construction, of which 112 are for LNG carriers.


A Q2 trading update from Pandora (+10%) revealed that 86% of stores were open by the end of June, up from 20% in April. Over the quarter, sales were 40% lower than in Q2 2019, notwithstanding a 176% jump in online revenues. However, trading improved through the quarter and the company expects operating profit excluding restructuring costs to be roughly breakeven – an improvement on the loss forecast in early May. Although financial guidance for 2020 is still suspended, the company did comment that current trends, with no further lockdowns in key markets, would put it on course for positive operating profit.


3i Group (+6.9%) issued an update showing a 6.8% NAV increase for its portfolio of private equity and infrastructure assets in the quarter to 30 June. Its most valuable investment by far is in European discount retailer Action. This business reopened all stores in mid-May and 3i commented that sales, earnings and cash generation have since been strong. Action continues to plan for more than 100 store openings in the remainder of the year.


Transport stocks International Consolidated Airlines Group (IAG, -26%) and Carnival (-16%) continued to struggle amid the near shutdown of their sectors, with both arranging new funding during July. IAG announced plans for a 2.75bn rights issue. Earlier in the month it issued Q2 results showing passenger capacity at 5% of the prior year’s level, resulting in a 1.37bn operating loss. Based on an assumed capacity recovery to around 25% and 50% in Q3 and Q4 respectively, IAG thinks it can reach break-even on operating cashflow during Q4.


Carnival issued a second quarter update that outlined more than US$7bn in cuts to annualised operating costs and a planned capital expenditure reduction of over US$5 billion over the next 18 months. It has reduced capacity by agreeing the sale of 13 ships (9% of capacity) and deferring new ship deliveries. It has also completed large bond issues to improve liquidity, the latest of which raised US$775m and €425m at coupon rates of over 10%.


Further phased changes to the Fund as a result of this year’s Cashflow Solution annual review process saw the addition of Dutch chemicals and plastics group LyondellBasell Industries and Brazilian insurance administrator Qualicorp Consultoria. The position in Spanish utility Endesa was sold.


Positive contributors to performance included:

Gaztransport et Technigas (+14%), Pandora (+10%) and 3i Group (+6.9%)


Negative contributors to performance included:

International Consolidated Airlines (-26%), Deutsche Pfandbriefbank (-18%) and Carnival (-16%).


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 30 June 2020. Its distributions over the 12 months to 30 June 2020 – expressed relative to the Fund’s price on 30 June 2019 – give a 12 month yield of 4.7%. The MSCI World Index yield on the same basis was 2.3%.

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








Liontrust Global Income I Inc






MSCI ACWI High Dividend Yield Index






IA Global Equity Income













*Source: Financial Express, as at 31.07.20, 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 30.06.20, 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.

Tuesday, August 11, 2020, 10:21 AM