Liontrust Macro Equity Income Fund

November 2019 review

The Liontrust Macro Equity Income Fund returned 2.9%* in November, compared with the FTSE All Share Index return of 2.2% and the 3.1% average return made by funds in the IA UK Equity Income sector.


The Fund’s most recent income distribution was announced on 31 July 2019, taking the Fund’s 12 month income yield to 5.5%. The Fund targets an income level of 110% the yield on the FTSE All-Share Index. The index yielded 4.2% over the same period.


In broad terms, November was a month of stasis. Whilst UK equities, but particularly mid- and small-caps, traded modestly firmer on the month, sterling and Gilts finished it largely as they’d begun. No doubt this reflected market anticipation of the December election and any associated uncertainty regarding Brexit and the UK economy. But a strong November showing for defensives like tobaccos and food producers speaks of a palpable tone of caution amongst UK investors.


Under such conditions, the portfolio lacked clear sector, or theme leadership. Instead, the vacuum was filled by individual holdings and the particulars of the corporate earnings season.


Direct Line (+12.2%), the general insurer and Digital Economy position, lead gainers as investors reacted enthusiastically to its November Capital Markets Day. The statement promised lower costs, an improved expense ratio, higher capital generation and a share buyback. Given Direct Line’s value rating and attractive 7%+ dividend yield, this was sufficient to trigger a significant share price rally.


Housebuilder and Infrastructure Spending constituent, Persimmon (+12.3%), also featured amongst the portfolio’s November winners. As before, share price impetus followed a well-received trading update. The company spoke of favourable trading over the reporting period (pricing and cancellations) and offered upbeat H2 guidance. We believe Persimmon is a quality operator trading on a value multiple and were unsurprised to see the share price appreciate.


Digital Economy holding, ITV (+8.5%), also merits mention by virtue of a Q3 trading update that exceeded analyst estimates. A strong revenue print followed a decent showing from both its production and advertising businesses. We remain holders as a 5%+ dividend yield and 11x forward earnings multiple afford little weight to the success of assorted digital initiatives, but especially its Britbox subscription streaming JV.


November was without disappointment. Chemicals business and Battery Revolution stock, Johnson Matthey (-5.6%) declined more than 9% following a poorly received interim update. Although headline earnings met analyst estimates, the combination of weak free cash flow and mixed segmental guidance saw the shares marked lower. This is frustrating, but the market’s knee-jerk response neglects that this is a business investing in growth and that the current valuation fails to reflect this. We hold Johnson Matthey to be a keenly priced way to play the coming mass adoption of electric vehicles.


Lastly, BT (-6.4%) was a notable drag on November returns. Memories of a decent late-October Q2 statement were quickly expunged, as a series of news stories unsettled investors. A contract loss to Vodafone, Labour’s threat of nationalisation and the expense of Champions League broadcast rights conspired to unsettle investors. Again, this is exasperating, but the combination of a thoroughly depressed valuation, strength in its consumer operations and the prospect of progress under relatively new CEO Philip Jansen, give abundant cause to expect change and some measure eventual of re-rating.


Macro-Theme Allocation (as at 30.11.19):

Macro Equity Income November 2019 Allocation

Source: Liontrust


Macro-Theme Changes [1]:


Population Ageing

The position St James Place was sold. Its premium rating is threatened by the discomfiting combination of mis-selling accusations, the very public problems of tied products and the cash strain of investing for earnings growth.

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








Liontrust Macro Equity Income I Acc






FTSE All Share






IA UK Equity Income













*Source: Financial Express, as at 30.11.2019, 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.


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

For a comprehensive list of common financial words and terms, see our glossary 


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 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.


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, December 18, 2019, 4:04 PM