Liontrust US Income Fund

Q4 2020 review

During the fourth quarter of 2020, the Liontrust US Income Fund returned 6.7%, versus the S&P 500 Index return of 5.9% and the IA North America sector average return of 7.8%*. The Fund ended the period with a yield of 1.72%.


US equities continued to build on their recovery from the sharp sell-off in the first quarter of the year and have surpassed previous highs that were seen in February before Covid-19 hit. The main event of the quarter was the US election which saw Joe Biden defeat Donald Trump for the White House, the Democrats maintain the House albeit with a smaller majority and, at the time of writing, the Senate going to a run-off in early January. This was not quite the so-called “Blue Wave” that had been predicted in the months leading up to the election but nevertheless led to a higher probability of more government support which arrived just before the year end in the form of a $900bn stimulus package. Markets also took solace from the prospect of lower geopolitical uncertainty under a Biden administration.

While the momentum behind the US economic recovery since the Spring has been impressive more fiscal support is welcomed in the face of the Covid-19 pandemic which continues unabated. A third wave, particularly driven by the Midwest region which had largely escaped the worst of the pandemic earlier in the year, became clear during the fourth quarter. More positively, with Covid hospitalisations and deaths rising to new levels not seen earlier in the year, we received news that the leading vaccines, including Pfizer’s vaccine, jointly developed with BioNTech, and Moderna’s are highly effective in preventing infections. Pfizer’s vaccine has already been granted emergency use authorisation in the US and it is hoped that this along with other vaccine candidates will leading to mass vaccination in the first half of 2021. Assuming manufacturing and distribution challenges be overcome this will help the US economy return towards “normality” as we progress through 2021.

The strong rally in stocks continued to have a notable cyclical bent and this was given a boost by the vaccine efficacy announcements at the end of October. This also helped smaller market cap companies, which had been hit noticeably hard in the sell-off earlier in the year, to outperform their larger peers by a considerable margin. The Russell 2000 index, a proxy for smaller caps, which had been more than 15% behind the S&P 500 earlier in the year indeed managed to finish ahead for the year as whole after a very strong final quarter. We are pleased to see smaller caps regaining some ground but also note that there some emerging signs of exuberance in certain pockets of the US market. There were a number of high-profile IPOs during the quarter which doubled on listing, including AirBnB and Snowflake, alongside a tsunami of SPAC, or blank check company, offerings. A number of these have made acquisitions in the Electric Vehicle space which need to be monitored carefully and mostly likely avoided.

The Liontrust US Income Fund outperformed the S&P 500 during the quarter and was also slightly ahead of its US Income peers in the IA North America sector. US Income strategies in general have struggled this year in the face of a market dominated by technology and particularly mega-tech companies. Income strategies, including ours, struggle to own these non-paying or low-paying dividend companies. This quarter however was better and helped by the vaccine announcement which propelled companies which were hardest hit by the pandemic. Many traditionally dividend rich sub-sectors fall into this category.

Strongest performers for the portfolio this quarter tended to be from the industrials and financials sectors. Both of these more cyclical sectors benefited from the vaccine announcement which helped to raise growth expectations for 2021 and caused bond yields to rise.  Our holdings within the banking sector, including Atlantic Union Bankshares and FifthThird, were particular beneficiaries alongside Brinks, the security company, which was particularly hard hit by social distancing measures earlier in the year but will benefit as the US economy gets back towards normality next year.

In terms of portfolio activity, we have made relatively minor changes to the portfolio. 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 31.12.20


**Source: FE Analytics as at 31.12.20

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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.


Monday, January 25, 2021, 3:54 PM