Liontrust Global Income Fund

October 2018 review

The Fund returned -6.0%* in sterling terms in October compared with -4.5% average return from funds in the IA Global Equity Income sector.


Market sentiment in October was firmly risk off with the MSCI World Index hitting its lowest level in over a year. It is difficult to point to just one catalyst for October’s market performance, and in reality it is likely the result of a number of factors which have been in play for the last few months.


One such component was rising bond yields. The US 10 year treasury yield showed a marked move higher at the beginning of the month as investors priced in a tightening in US interest rates. This resulted in a number of market commentators calling the end of the bond bull market which has been in trend for many decades, though bond yields did fall slightly at the end of the month as investors fled to safe havens.


Perhaps the return of volatility to both equity and bond markets should be unsurprising given the gradual removal of the considerable monetary accommodation provided by global central banks. The European Central Bank has begun winding down its quantitative easing programme, while the US Federal Reserve is shrinking its sizable balance sheet, as well as raising interest rates.


Another factor was concerns over global growth following a number of poor economic data releases, compounded by downgrades to economic growth forecasts by the International Monetary Fund (IMF). Citing hostile trade measures by the US against China and Europe, the IMF lowered its 2018 and 2019 growth estimates to 3.7% from 3.9%.


There was a rotation towards defensive sectors of the market during the sell-off. In sterling terms, utilities (+1.6%) was the best performing sector in the MSCI World Index, followed by consumer staples (+0.8%) and telecoms (-1.2%). At the bottom of the pile were industrials (-8.3%), energy (-8.0%) and materials (-7.4%).


Given the Fund’s tilt towards cyclical areas of the market, it felt the brunt of the sell-off. Stocks such as tyre manufacturer Nokian Renkaat (-20.8%), paper and pulp manufacturer UPM-Kymmene (-16.3%), and hotel and casino investor Las Vegas Sands Group (-12.0%).


Though share price moves were largely driven by sentiment, all of the above companies also released third quarter updates which disappointed versus market expectations. Nokian Renkaat’s earnings before interest and taxes (EBIT) fell 4.3% to €85.9m due to declines in its Passenger Car Tyres and Heavy Tyres business. This was below the consensus forecast of €98.5m. UPM’s adjusted EBIT grew to €420m from €351m in the same period last year, but fell short of the consensus estimate of €447m, while Las Vegas Sands’ third quarter results also disappointed on the revenue line.


Furthermore, dollar strength also hampered Fund returns. The greenback, which touched its highest level since the end of 2016 in trade-weighted terms, held strong while other currencies fell on poor macro data. This had the effect of boosting sterling-terms returns from US equities, to which the Fund is underweight.


Portuguese paper and pulp group The Navigator Company (+3.8%) issued some positive news as it noted that the US Department of Commerce cut the imposed anti-dumping duty for the period between August 2015 and February 2017 to 1.75% from 37.34%. This meant the negative impact on earnings would be €3m compared to €66m. 

Positive contributors to performance included:

Altri SGPS (+7.1%), Vtech Holding (+3.9%) and The Navigator Co (+3.8%).


Negative contributors to performance included:

International Personal Finance (-20.9%), Nokian Renkaat (-20.8%) and BOC Hong Kong Holding (-19.6%).


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








Liontrust Global Income I Inc






IA Global Equity Income













*Source: Financial Express, as at 31.10.2018, 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.

Tuesday, November 13, 2018, 12:26 PM