Liontrust Global Income Fund

June 2020 review

The Fund returned 1.6%* in sterling terms in June. The MSCI ACWI High Dividend Yield Index comparator benchmark returned 1.2% and the average return from funds in the IA Global Equity Income sector – also a comparator benchmark – was 2.1%.

 

The rebound continued for global equity markets as green shoots started appearing in economic data. The most significant of these positive economic data releases was a hugely surprising US jobs report, which confounded expectations of a decline in non-farm payrolls and a rise in unemployment. In May, the US Bureau of Labor Statistics reported a 2.5m increase in non-farm payrolls, while unemployment fell to 13.3% from 14.7% in April. European data also showed signs of encouragement, with better than expected PMI survey scores from a number of countries across the continent.

 

However, it was not all plain sailing for equities during June. One of the key risks to the economic recovery is a second wave of coronavirus infections and the rise in new cases this month, particularly in the US and China, gave investors cause for concern. The states of Texas and Florida reversed their reopening plans due to mounting cases, while China reinstated lockdown in a province just outside of Beijing. In a speech before the Committee on Financial Services, Federal Reserve Chair Jerome Powell noted that the path ahead for the US economy is extraordinarily uncertain and it remains heavily dependent on the extent to which t the virus’s spread is kept in check. 

 

Members of the European Central Bank’s governing council were equally cautious on recovery prospects. President Christine Lagarde said the virus has caused an unprecedented contraction in eurozone economic activity, as the Bank unveiled new economic projections of an 8.7% real GDP contraction in 2020. The ECB also stated that it would add a further €600bn to its pandemic emergency purchase programme, taking total bond purchases to €1,350bn. 

 

The MSCI World’s returns were driven largely by cyclical sectors such as IT (+6.7%), consumer discretionary (+4.2%) and materials (+3.4%) while health care (-1.8%), utilities (-1.7%) were among the sectors to end lower.

 

The strongest area for the Fund was once again its materials holdings: Anglo American (+9.9%), Boliden (+6.5%) and Rio Tinto (+5.5%). Iron ore futures maintained the gains made in late May as concerns spread that mines in Brazil may have to close as the country struggles to contain coronavirus cases.

 

Away from miners, Polish mobile network operator Play Communications (+8.1%) saw its shares rise following press reports that it is considering the sale of its portfolio of 8,000 mobile sites. It was suggested that these assets could secure a sale value of 800m.

 

Cruise operator Carnival (-6.8%) has seen a severe disruption to its business as a result of coronavirus and this was evident in the company’s second quarter results. It reported a net loss of US$4.4bn with revenue dimished to US$700m from US$4.8bn in the previous year. The company’s operations were on pause for the majority of the second quarter and a resumption of normal service remains uncertain.

 

There were a handful of changes to the portfolio during the month. South African bank FirstRand was spun out of RMB Holdings. At this stage we have retained our position in FirstRand and sold the RMB rump position.

 

Elsewhere we added London-listed geotechnical contractor Keller Group and advertising conglomerate WPP. We sold out of Boliden, GlaxoSmithKline, Royal Dutch Shell, Sberbank and Total.

 

Positive contributors to performance included:

Peugeot (+14.2%), Anglo American (+9.9%) and Yuexiu Transport Infrastructure (+9.4%).

 

Negative contributors to performance included:

Seagate Technology (-7.7%), Carnival (-6.8%) and Telenor (-4.2%).

 

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 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:

 

 

Jun-20

Jun-19

Jun-18

Jun-17

Jun-16

Liontrust Global Income I Inc

-14.6

4.6

6.0

18.5

7.5

MSCI ACWI High Dividend Yield Index

-3.0

13.3

2.9

16.5

19.0

IA Global Equity Income

-2.6

8.4

3.6

19.2

9.6

Quartile

4

4

2

3

3

 

*Source: Financial Express, as at 30.06.20, 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. 

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.

Monday, July 13, 2020, 9:49 AM