Liontrust Income Fund

Q4 2019 review

The Liontrust Income Fund returned 3.4%* over the fourth quarter, meaning it narrowly underperformed the FTSE All Share index, which returned 4.2%. The average return across the IA UK Equity Income sector was 7.2%.


Market Overview


Global equities enjoyed a strong quarter as recessionary fears subsided. The main driver behind this was an easing in trade tensions between the US and China, with a phase one trade deal between the two countries agreed towards the end of the quarter. The UK market was one of the strongest performing developed markets largely driven by the general election result. Not only did the unexpectedly large Conservative Party majority end fears of a Corbyn-led Labour government, given the Tories’ more business-friendly policies, but it also created further certainty regarding the UK’s future relationship with the EU. The result led to a bounce in sterling, as well as the considerable outperformance of more domestically orientated stocks within the UK market (as shown by the FTSE 250 index’s strong returns over the quarter). 


Portfolio Attribution


The Fund’s underperformance was primarily driven by two factors. The first of which is the Fund’s focus on large and mega-caps, which lagged the strong outperformance of FTSE 250 stocks over the quarter. The other driver of relative underperformance was the portfolio’s North American holdings, which were hurt on a relative basis thanks to the pound’s rally versus the dollar. That being said, the strongest individual contributor to returns was Apple, which surprised the market after responding quickly to softening Chinese demand by lowering the average selling price of iPhones sold in Asian markets. This was followed by a better than expected iPhone 11 launch and continued expansion of its services revenue. However, the major catalyst for the stock was the unanticipated success of the wearables division, in particular, the Airpods and iWatch. Other positive contributors included the Fund’s real estate holdings, Land Securities and British Land, as well as Legal & General, all of which benefited from improved sentiment towards the UK economy.


The largest detractors to returns at a stock level were CME Group and Constellation Software. As a futures exchange, CME Group tends to be more of a defensive play, performing better on a relative basis during periods of heightened volatility and therefore the strong performance of global equities (alongside reduced uncertainty) did the stock few favours.




We have become incrementally more positive on the UK market. While the election result by no means cures structural economic issues such as poor productivity growth, we believe it has removed certain major headwinds and has provided the pathway to a sensible conclusion to the Brexit saga. While the threat of a cliff-edge Brexit remains, we believe there is potential for a “catch-up” bounce back in UK economic growth, now there is greater clarity surrounding the political environment. This is due to a potential pickup in corporate spend, with UK capex up just 0.5% since the EU referendum, compared to 13% (on average) for the OECD over that same period. We have initiated positions in certain UK stocks as major headwinds have subsided and are currently monitoring our overall exposure to the US market/dollar given the potential for shorter-term sterling strength. 


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








Liontrust Income C Acc






FTSE All Share






IA UK Equity Income













*Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)


**Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)


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 Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.


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, January 24, 2020, 9:41 AM