Liontrust Macro Equity Income Fund

December 2017 review

The Liontrust Macro Equity Income Fund returned 3.0%* in December, behind the 4.8% return from the FTSE All Share Index.

While any measure of underperformance is keenly felt, it seems reasonable to suggest that December should be viewed in the context of characteristically illiquid seasonal trading. The Fund outperformed the index for much of the Christmas run-in, only ceding ground as the trading calendar became punctuated by public holidays.

December’s key performance positive was the strength of the portfolio’s materials exposure. Comprised of Battery Revolution holding Glencore and Infrastructure Spending constituents Rio Tinto and Anglo-Pacific, share price momentum reflected the vigorous performance of underlying commodities. It seems difficult to avoid the conclusion that commodity strength flowed directly from December’s US dollar weakness; the Dollar Index’s 1% decline on the month capping a 10% slide for 2017.

Causation aside, commodity price strength offers confirmation of our constructive view on the global economy and augurs well for our miners’ cyclically geared dividend policies.

The housebuilders and building materials businesses of the Infrastructure Spending theme also made notable contributions to portfolio returns. In the case of the housebuilders this represented a corrective to the sell-off that greeted Chancellor Hammond’s well-flagged Autumn Statement. The building materials businesses (Forterra, Ibstock, Marshalls) simply saw an extension of investor appetite for cheaply-rated businesses with gearing to UK economic growth. Either way, we read this as an endorsement of our upbeat assessment of the UK’s economic prospects.

Fund returns were given further impetus by a second buoyant month for the Data Growth theme. As per November, we lacked obvious catalysts to explain the strength. If anything, we’d suggest it speaks of a clamour for our telecoms companies’ defensive value characteristics in the midst of a mature bull market where valuations are often full.

December’s performance was crimped by a profit warning from Saga, part of our play on Population Ageing. We note the warning was without precedent and that it carries the implicit threat of further investor disappointment. Under such conditions, the only prudent action is to reduce exposure and limit investor risk, pending news of stabilisation.

Returns were also impacted by a flat month for the life insurers that make up much of the Population Ageing theme. Stock-specific explanations are lacking, but we note a flat month for benchmark bond yields and the close correlation often observed between life insurers and yields.

Macro-Theme Allocation:

Liontrust Macro Equity Income Fund December 2017 review - Macro-Theme Allocation

Macro-Theme Changes[1]:

Population Ageing

The position in Saga was reduced owing to a disappointing trading update and profit warning. The cost of acquiring new business and a ‘challenging trading environment’ in broking suggest substantial risks of further negative newsflow and warrant lower Fund exposure. Primary Healthcare Properties exited the portfolio, the inclusion of carefully managed, long-running exit in an illiquid name which has a material premium to NAV and carries significant risk of share price correction.

Battery Revolution

We increased the position in Glencore, taking it closer to target weighting. The company derives c.40% of operating profit from materials applicable to electric vehicles, while deleveraging permits more generous dividend disbursements.

Consumer Spending

The Cineworld bid for US cinema operator Regal Operator holds material risks and we have reduced the Fund’s exposure to the stock accordingly. A substantial pick-up in post-deal leverage is unappealing while the deal also entails entering a new market of which management has negligible operational experience.

[1] The omission of a Macro-Theme expresses the absence of notable portfolio activity.

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








Liontrust Macro Equity Income I Acc






FTSE All Share Index






IA UK Equity Income












*Source: Financial Express, as at 31.12.2017, total return (net of fees and income reinvested), bid-to-bid, institutional class.

This review has been prepared for the Liontrust Macro Equity Income Fund but is also representative of the Liontrust GF Macro Equity Income (the Feeder Fund). The performance of the Liontrust GF Macro Equity Income Fund may differ from the performance of the Liontrust Macro Equity Income Fund (the Master Fund) and will typically be lower due to additional fees and expenses.

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. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Investment in Funds managed by the Macro Thematic team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. The performance of the Liontrust GF Macro Equity Income Fund may differ from the performance of the Liontrust Macro Equity Income Fund and is likely to be lower than its corresponding Master Fund due to additional fees and expenses.


This content 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy.  It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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, January 10, 2018, 11:54 AM