Liontrust Global Income Fund

March 2018 review

The Fund returned -3.5%* in sterling terms in March compared with the -4.1% return from funds in the IA Global Equity Income sector.


Global equities took another leg lower in March, this time due to growing concerns of a trade war. US President Donald Trump announced a 25% tariff on steel imports and a 10% tariff on aluminium imports. This raised the expectation of retaliation from other major powers and Trump’s hint that some trading allies will be temporarily spared from the tariffs was not enough to reverse market sentiment. In addition, Trump announced a 25% tariff on up to US$60bn in annual imports from China.


Elsewhere, global monetary policy continued to tighten. New US Federal Reserve Chair Jerome Powell oversaw the central bank’s first interest rate increase of 2018. Though the Federal Open Market Committee’s dot-plot of future interest rate estimates showed no change to the three projected hikes in 2018, its rate expectations for 2019 were upgraded. The European Central Bank dropped wording about expanding its bond-buying programme from its policy statement, indicating another step towards curbing its quantitative easing scheme.


In terms of sector performances, utilities (+2.0%) was the only area in the MSCI World Index to end the month in positive territory in sterling terms. The weakest sectors in the index were financials (-6.0%), materials (-5.9%) and IT (-5.4%).


The Fund’s small outperformance versus the sector and the MSCI World Index (-3.9% in sterling terms) was partly due to its underweight exposure to the US market where Trump-induced jitters meant stocks across the pond endured weakness, which was amplified by a 1.5% depreciation in the dollar versus the pound.


Away from political and monetary policy developments, a number of Fund holdings released results for 2017. Deutsche Pfandbriefbank (-11.6%) was one such holding, reporting a 21% rise in pre-tax profit in 2017 to €204m, driven by net interest and commission income. However, management guided pre-tax profit for 2018 to be between €150m-€170m reflecting lower aggregate net interest and commission income and costs in relation to its real estate finance portfolio. 


Another financial holding, RMB Holdings (-11.6%), saw a fall in its share price despite some positive interim results. Net asset value for the South African diversified financial company rose 8% year-on-year for the six months to end December 2017, while net income increased 3%. The group also raised its interim dividend to 168 South African cents from 153 cents.


Among the gainers was Giordano International (+17.2%). The Hong Kong-based apparel retailer reported a 5% improvement in consolidated sales and a 15% rise in profit after tax in 2017. This performance allowed the company to raise its final dividend to 20 Hong Kong cents per share which took its total dividend payment to 35 cents in 2017, up from 27.5 cents in 2016.


Portuguese energy company EDP-Energias de Portugal’s (+11.1%) shares rose despite reporting difficult conditions in 2017. Gross profit during the year fell 6% while recurring EBITDA (earnings before interest, tax, depreciation and amortisation) fell 5% due to an extreme drought in Portugal and Spain reducing its hydro resources.


In keeping with the Cashflow Solution investment process, we began our annual review of companies’ report and accounts. Throughout the next few months we will implement changes to the Fund holdings in line with our findings from the review. The yield objective of the Income Fund makes it prudent to consider the dividend payment calendar of our companies when managing the annual restructuring of the portfolio. Therefore portfolio changes are phased according to the timing of dividend receipts.    



Positive contributors to performance included:

Big 5 Sporting Goods (+18.8%), Giordano International (+17.2%) and EDP – Energias de Portugal (+11.1%).


Negative contributors to performance included:

RMB Holdings (-11.6%), Deutsche Pfandbriefbank (-11.6%) and VTech Holdings (-10.0%).



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







Liontrust Global Income I Inc






IA Global Equity Income













*Source: Financial Express, as at 31.03.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.

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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. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Investment in the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates.  The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation.


This content 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy.  It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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, April 18, 2018, 11:09 AM