Liontrust Global Income Fund

November 2018 review

The Fund returned 0.3%* in sterling terms in November compared with 1.6% average return from funds in the IA Global Equity Income sector.


The primary reasons for the Fund lagging the IA sector and the MSCI World Index (+1.3%) were the poor performance of the materials sector (which the Fund is overweight with a 16% exposure) and the strong showing from the US (a market to which the Fund has a long-standing and significant underweight position).


The strength of the US Market was such that it added more than a percentage point to the performance of the MSCI World Index of developed markets. The MSCI World ex-USA Index return was flat for the month, while the

MSCI USA Index returned 2.0%. US stocks took some impetus towards month-end from Federal Reserve Chairman Jerome Powell’s comments that US rates were closing in on a neutral level. Earlier in the month it had kept rates on hold at 2%-2.25%. US mid-term elections resulted in the Republican Party losing control of the House of Representatives but extend its majority in the Senate. The result was in line with expectations and was interpreted as broadly neutral for markets.


European markets, however, were unable to avoid finishing in negative territory for the month. Brexit newsflow was once again to the fore as the UK and EU agreed terms on a draft exit treaty which, having received approval from May’s cabinet, will now proceed to a parliamentary vote in December.


The market rotation towards defensive areas continued. Health care (+5.5%), real estate (+4.6%), communications services (+4.0%, formerly telecoms) and utilities (+3.5%) were the best performing areas of the MSCI World Index. Energy (-3.4%), IT (-1.9%) and materials (-0.9%) were all in negative territory. The fall in energy stocks was exacerbated by Donald Trump’s public criticism of Saudi Arabia’s mooted plan to cut oil production. The oil price tumbled more than 20% to US$58.7/barrel.


We continue to apply the Cashflow Solution investment process in a disciplined and consistent manner. Within the framework of this process, we cannot justify significantly increasing the Fund’s US weighting due to the paucity of highly cash generative companies on attractive valuations. Despite October’s correction, US equities remain very expensive.

Equally, while the materials sector exposure has been to the detriment of Fund performance over the last two months, we think still see value here as corporate aggression levels are low and valuation spreads are above normal. In November, UPM-Kymmene (-17.1%) and Navigator (-15.8%) were the two portfolio holdings to suffer most from sector weakness.

From a stock-specific perspective, Hong Kong-based electronic products manufacturer VTech Holdings (-19.2%) was the month’s worst performer. It reported a 13% dip in profits to US$90.1m in the six months to 30 September as gross margin contracted from 32.3% to 29.5% and revenues fell 3.5%. The company attributed the worse-than-expected results to a weak performance of its telecoms products and logistics issued in Europe for its electronic learning products. None of the company’s final products are directly targeted by the US$250bn worth of US tariffs imposed on Chinese imports, but they do affect some of VTech’s customers that use its contract manufacturing services. As a result, the company has recently acquired production facilities in Malaysia through which to continue offering this service tariff-free.


The New Zealand dollar was one of the world’s strongest currencies in November, appreciating by 5.6% against sterling. This boosted returns from the Fund’s two holdings in the country - Air New Zealand (+15.9%) and Spark New Zealand (+12.8%). Telecoms operator Spark also issued an AGM statement re-affirming guidance for EBITDA (earnings before interest, tax, depreciation and amortisation) and dividends in the year to 30 June 2019.


A handful of changes were made to the Fund’s portfolio of holdings. Natixis and and Oesterreichische Post were sold. New positions were established in UK-based bank note manufacturer De La Rue, Portuguese industrial conglomerate Altri, Australian long lease property manager Charter Hall Group, Taiwanese battery manufacturer Simplo Technology and Australian telecoms company Telstra.  


Positive contributors to performance included:

International Personal Finance (+22.8%), Air New Zealand (+15.9%) and Spark New Zealand (+12.8%).


Negative contributors to performance included:

VTech Holdings (-19.2%), UPM-Kymmene (-17.1%) and Navigator (-15.8%).

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








Liontrust Global Income I Inc






IA Global Equity Income













*Source: Financial Express, as at 30.11.2018, 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 30.09.2018, total return (net of fees and income reinvested), bid-to-bid, primary 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. 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.

Friday, December 7, 2018, 4:26 PM