Liontrust US Income Fund

Q4 2019 review

During the fourth quarter of 2019, the Liontrust US Income Fund returned 0.3%* versus the S&P 500 Index return of 1.3% and the IA North America sector average return of 1.2%. The Fund ended the period with a yield of 1.95%†.


Market Overview


US equities had a strong final quarter in 2019 albeit returns for sterling-based investors were contained by the strength of the currency, which surged as a Conservative general election victory became more probable, and the weakness of the US dollar. Sterling was almost 8% stronger in the period. Equity markets were buoyed by positive news on a number of fronts that had created a so-called “wall of worry” in 2019. The Fed cut interest rates at the end of September, further reducing the likelihood of a policy mistake that had sent markets into a tailspin at the end 2018. We also saw the likelihood of reduced trade tensions between the US and China culminating in an announcement of the signing of “Phase 1” deal in early 2020. And finally, but no less importantly, concerns over the strength of the global economy dissipated somewhat with global PMIs no longer deteriorating, and in some cases, improving during the last 3 months of the year. The combination of easy monetary policy, reduced trade tension, less uncertainty over Brexit and global macro momentum improvement provided a strong backdrop for equity markets.


Portfolio Attribution


At the sector level, the rally had a significant cyclical bend to it, with utilities, REITs and staples lagging. Sectors such as technology, financials and materials which were exposed to improving global and Chinese growth fared most strongly. Healthcare defied its typically defensive characteristics and lead the rally over the quarter. The sector had suffered for most of 2019 with rhetoric over drug pricing and Medicare for All, a NHS-style system, pressuring valuations. However, it bounced as momentum for Elizabeth Warren, a Democrat presidential candidate, stalled − she had been gaining relative popularity for much of this year.


Once again, the quarter contained a number of critical global macro and geopolitical events. A heightened level of geopolitical uncertainty continues, in our view, to support our strategy of not being aggressively overweight or underweight individual sectors. Instead, we look to deliver outperformance by finding companies within sectors that are well placed from our disruption theme angle and sustainably grow dividends ahead of the market. Often, we feel the market underappreciates dividend paying companies like these.

The Fund lagged the wider IA North America peer group but more representatively outperformed its US Income peers within the sector.


Given the strength of healthcare it was perhaps unsurprising that a number of the Fund’s strongest performers came from that sector. The Fund’s more cyclical stocks also benefited from improved global sentiment and companies including Rockwell Automation and Luxfer, the advanced engineering company enjoyed strong periods. The Fund’s holdings in more defensive sectors held back performance but this was not surprising given market conditions. The most negative attributor was James River, the specialty non-life insurer. They choose to no longer insure a major ride-sharing customer on the grounds of higher than expected claims and hence lower than expected profitability. This is clearly the correct course of action but nevertheless causes an earnings hit to the company. 


The Fund’s turnover remained very low during the quarter and we remain focused on finding dividend stocks with latency potential and where we believe the outlook for dividend growth has room to improve in the medium term.


†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: 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)


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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, 10:56 AM