Liontrust US Income Fund

Q2 2021 review

During the second quarter of 2021, the Liontrust US Income Fund returned 4.4%, versus the S&P 500 Index return of 8.3% and the IA North America sector average return of 7.8% (both comparator benchmarks)*. The Fund ended the period with a yield of 1.47%.


US equity markets continued their strong rally but were driven more by the secular growth areas of the market as opposed to the more cyclical areas which have dominated in recent quarters. The more cyclical and reflationary factions of the market have enjoyed a strong run after the vaccination efficacy announcements last October and thanks to the Democrats’ more stimulatory agenda catalysed by a Biden presidency last November and the Georgia Senate election run-off seats in January. The dominant debate this year, so far, has surrounded inflation and whether the pick-up in inflation we have seen is transitory in nature or something more structural which will cause the Fed to tighten monetary policy quicker than otherwise might have been expected. Alongside evidence that the US economy is bouncing back from the pandemic extremely impressively, growth in 2021 is likely to be fastest in almost 40 years, fears over inflation had driven 10-year US bond yields up to c.1.75% by the end of the first quarter, rising by 0.83% in just three months. Inflationary fears have subsided during this latest quarter, with investors deducing that many of the factors that are causing the current pick-up in inflation will be more temporary in nature (e.g. supply chain shortages). Bond yields subsequently subsided helping the more secular growth areas of the market over the quarter.

The swift economy reopening in the US has been helped by the impressive vaccination rollout. By the end of June over 2/3rds of US adults had received at least one dose and this has spurred a sharp reduction in daily Covid case counts and hospitalizations since the start of the year. The Delta variant has however inevitably found its way to the US and by the end of the quarter was thought to account for 20% of all cases. This will rise and could cause a speedbump to the rapid reopening where US consumers are sitting on substantial savings and have shown clear appetite to spend their stimulus cheques.

The strong macro backdrop has shown up in earnings for US companies. First quarter earnings which were reported during the last 3 months posted one of the strongest upside surprises in history with S&P 500 earnings growth finishing up 49% year over year (more than double the 21.6% consensus expectation). It now looks possible that earnings growth for S&P 500 could hit 45% for 2021 as a whole.

The US Income fund returns lagged the S&P 500 during the quarter in keeping with US Income strategies more generally which struggled against the wider market during the period in large part due the strong quarterly performance from large-cap, predominantly non-dividend paying, tech.

Strongest performers, this quarter, included Target, one of the largest retailers in the US. The company is benefiting from a US consumer that has built up significant savings over the pandemic, helped by the generous government stimulus packages. Additionally, Target is benefiting from its strong omnichannel offering which is proving a crucial retailing strategy as we emerge from the Covid pandemic.  Many of the weaker performers, this quarter, were found in the Fund’s financials exposure and in particular the banking sector. Bond yields having risen significantly at the beginning of the year retraced somewhat over the last few months hampering the outlook for bank earnings in quarters to come.

In terms of portfolio activity, we made relatively minor changes to the portfolio over the quarter. We continue to believe that our central theme of disruption will be a key determinant of those companies which can get back to sustainable growing dividends and those that can’t.

†Net underlying yield quoted on C Income share class. The yield on other share classes may differ.


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








Liontrust US Income C Acc GBP






S&P 500






IA North America













*Source: FE Analytics as at 30.06.21


**Source: FE Analytics as at 30.06.21. Quartiles generated on 07.07.21

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 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.

Thursday, July 29, 2021, 10:09 AM