Liontrust Global Income Fund

September 2019 review

The Fund returned 1.7%* in sterling terms in September compared with a 1.4% average return from funds in the IA Global Equity Income sector.


The Fund’s most recent income distribution was announced on 30 June 2019, taking the Fund’s 12 month income yield to 5.0%. The Fund targets an income level in excess of the yield on the MSCI World Index. The index yielded 2.7% over the same period.


Global equities staged a recovery from August’s slump as central bank policy again took centre stage. The European Central Bank cut benchmark interest rates further into negative territory and altered its forward guidance to state that rates would remain at these levels or lower until inflation picked up to close to the 2% target. Previously the bank had only committed to avoiding rate rises until mid-2020. It also revived quantitative easing, announcing an open-ended €20bn-a-month programme from November.


The US Federal Reserve cut rates by 25 basis points to a range of 1.75%-2.0%, in a move interpreted as a hawkish cut. The Fed’s indication that further cuts should not be expected drew the ire of President Trump, who launched another twitter attack on Jay Powell. Trump became more incensed as a formal impeachment enquiry was opened later in the month after accusations that he had asked Ukraine to investigate Joe Biden.


Developments in the US-China trade spat continued to be volatile, with both parties announcing some temporary postponement of tariffs before the month finished with speculation the US was exploring ways of limiting investment in China’s financial markets. Political volatility was also an ongoing feature in the UK as Parliament passed an emergency law to stop no-deal Brexit and then blocked Boris Johnson’s attempts to hold a snap election. He proceeded to suspend Parliament, only for the Supreme Court to rule that the move was unlawful.


Oil prices surged following attacks on Saudi Arabian oil facilities that were blamed on Iran. Brent crude rose 15% to US$69/barrel on the day of the attack, before settling down to US$61 by month end.


The MSCI World index energy sector rose 3.7% in September, beaten only by financials (+4.4%). Health care (-1.1%), communication services (-0.8%) and consumer staples (-0.3%) lost ground in sterling terms.


There was also a significant shift in the style bias to market returns in September, as equities with ‘value’ characteristics markedly outperformed those with ‘growth’ credentials. The MSCI World Value index returned 2.7%, compared to the -0.7% from the Growth index. It was also notable that momentum-based strategies proved very volatile as market leadership shifted between these groups of stocks.


We have noted surges in both corporate optimism and investor anxiety in the US. Investor anxiety has climbed particularly in sectors vulnerable to a prolonged trade war with China. While these conditions are not replicated in Europe, style and market direction in Europe are highly correlated with developments in the US, so we will monitor developments closely. High investor anxiety often precedes strong performance from value strategies, so while this measure remains elevated we could observe further sharp bouts of style rotation.


Against this backdrop, the Fund’s 18% allocation to the financials sector was a source of positive attribution relative to the MSCI World Index. One of the strongest sector holdings was emerging markets specialist asset manager Ashmore Group (+12.2%). It reported on a 24% increase in assets under management to US$91.8bn in the year to 30 June 2019, following net inflows of US10.7bn and an investment performance effect of US$6.9bn. This asset increase helped deliver an 11% rise in revenues to £308m and a 15% rise in profit before tax to £220m, ahead of analysts’ consensus forecast of around £214m.


Singaporean real estate investment trust Mapletree Industrial Trust (+10.1%) was another portfolio riser. It took a 50% stake in a joint venture to buy a portfolio of North American data centres from Digital Realty and invested in a further three ‘hyper-scale’ data centres. The deal had a total consideration of around US$1.4bn; Mapletree Industrial Trust partially funded its contribution through a private placement of 177m new units at S$2.27.


Chinese road and bridge concessions operator Yuexiu Transport Infrastructure (+10.1%) announced a new investment in September. It is spending around US$850m on companies operating three expressway in China’s Hubei province. This deal increases the company’s toll mileage from 337km to 535km, with the average concession length extending from 17.2 years to 19.1 years.  Although the acquired toll roads have been operating at a net loss, Yuexiu Transport Infrastructure believes the roads are approaching the end of their incubation phase and are set to benefit from their prime position connecting Wuhan, the capital city of Hubei, with surrounding regions.


Amgen (-8.2%) shares fell after Phase 1 trial data for a cancer drug failed to live up to lofty expectations. The study of 76 patients showed some evidence of anti-tumour activity for colorectal cancer, appendiceal cancer and non-small cell lung cancer, but the results were not strong enough to hold on to share price gains made in September.


We implemented a handful of changes to the Fund’s portfolio during the month, disposing of Nordea, Sampo and ASR Nederland and adding positions in 3i Group, Gaztransport et Technigaz and Poste Italiene


Positive contributors to performance included:

Ashmore Group (+12.2%), Yuexiu Transport Infrastructure (+10.1%) and VTech Holdings (+9.2%).


Negative contributors to performance included:

Amgen (-8.2%), Charter Hall (-8.5%) and Telstra (-6.3%).


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 30.09.2019, 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 30.09.2019, 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.

Wednesday, October 16, 2019, 9:54 AM