Liontrust Global Income Fund

September 2020 review

The Fund returned -0.4%* in sterling terms in September. The MSCI ACWI High Dividend Yield Index comparator benchmark returned 1.1% and the average return from funds in the IA Global Equity Income sector – also a comparator benchmark – was flat.

 

Global equity direction was split between growing concerns about a second wave of coronavirus and further stimulus to support economies through the pandemic. Daily recorded cases of the virus have risen to levels seen during the initial outbreak and stricter restrictions have been put in place in some regions.

 

The ongoing pressure from the virus has weighed on economic forecasts, as highlighted by the European Central Bank’s inflation outlook in the eurozone. ECB President Christine Lagarde acknowledged that inflation is expected to be negative over the coming months, reflecting weak energy prices, a stronger euro and a temporary reduction in VAT in Germany. The Bank’s forecasts show that inflation is expected to be below its target of close to 2% for at least the next two years.

 

Lagarde reiterated that the governing council stood ready to act to ensure inflation moves towards its aim in a sustained manner. She also hinted that the Bank could consider letting inflation running above target for a period of time, echoing remarks made by US Federal Reserve President Jerome Powell last month.

 

The best performers in the MSCI World Index were utilities (+3.1%), industrials (+3.0%) and materials (+2.9%). It was a particularly poor month for energy (-11%), which lagged far behind other sectors. Some of the Fund’s worst performers were energy stocks: Lundin Energy (-16%) and Lukoil (-12%).

 

International Consolidated Airlines Group (-34%) was the biggest single faller as investors factored in implications of further lockdowns and travel restrictions. The company also updated on current trading saying that following a complete suspension of booking activity in April and May, June bookings recovered to 30% of prior year levels. However, this levelled off in July due to requirements to quarantine after travelling to certain regions. It lowered its forecasts for fourth quarter capacity to a 60% fall from 2019, compared to its previous estimate of a 46% fall. 2021 capacity is expected to decline 27% compared to 2019. The company also completed a rights issue, raising €2.74bn which will be used to improve balance sheet liquidity and reduce financial leverage.

 

Polish telecoms company Play Communication (+24%) was the Fund’s biggest gainer after agreeing to be acquired by France’s Iliad for €2.2bn, representing a 39% premium to the share price at the time. South African bank FirstRand (+15%), meanwhile, said it’s eager to resume its dividend having suspended it in the wake of the coronavirus crisis. As in Europe and the UK, South Africa’s regulators had urged banks to pause their payout, but Chief Executive Alan Pullinger said the lender is ready to pay dividends once the regulator gives the green light.

 

Emerging markets asset manager Ashmore Group (-15%) reported full year results which showed a 0.7% rise in pre-tax profit and a 5% rise in adjusted net revenue. However, assets under management declined 9%, largely due to a negative market performance during the onset of the Covid-19 crisis. The company declared a 12.1 pence dividend which was flat year-on-year but the total dividend of 16.9p was 1.8% higher.

  

Positive contributors to performance included:

Play Communications (+24%), FirstRand (+15%) and Vtech Holdings (+10%)

 

Negative contributors to performance included:

International Consolidated Airlines Group (-34%), Lundin Energy (-16%) and Ashmore Group (-15%).

 

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:

 

 

Sep-20

Sep-19

Sep-18

Sep-17

Sep-16

Liontrust Global Income I Inc

-15.4

3.2

6.3

10.4

25.8

MSCI ACWI High Dividend Yield Index

-7.6

10.7

8.3

10.8

33.7

IA Global Equity Income

-3.9

7.0

7.0

12.3

24.7

Quartile

4

4

3

3

3

 

*Source: Financial Express, as at 30.09.20, 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 30.09.20, 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.

Wednesday, October 14, 2020, 12:35 PM