Liontrust Global Income Fund research update

Richard Troue | Mon 11 May 2015

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The yields available on shares continue to look attractive when compared with other types of investment. In addition, James Inglis-Jones and Samantha Gleave, managers of the Liontrust Global Income Fund have suggested finances in the corporate world remain in good shape and they are positive on the outlook for dividend growth this year.

Presently, they are finding some of the best opportunities among consumer-related companies. Lower oil prices have reduced fuel and transportation costs, putting more money into people's pockets. If this filters through to increased spending it should boost the earnings of consumer goods and services companies. Clothing manufacturers Next and Hugo Boss, listed in the UK and Germany respectively, are key holdings in this sector. The managers have been impressed with the dividends delivered by both in recent years although there are no guarantees this will continue.

Elsewhere, they have seen strong performances from Man Group, the asset manager listed on the FTSE 250 index of medium-sized companies; and BPost, Belgium's incumbent postal operator. The former has benefited from an improvement in the performance of one of its key funds, while the latter has cut costs and expanded its parcel delivery service, aiding cash generation.

Having previously focused on the UK James Inglis-Jones and Samantha Gleave have evolved the fund into a global income portfolio over the past year, which includes the flexibility to invest in higher-risk emerging markets. Exposure to UK-listed companies has fallen to around 47% and they favour Europe for much of their international exposure. In contrast, they only have around 2.7% invested in the US which is low relative to the size of the US stock market in a global context.

Geographic Breakdown

Source: Liontrust as at 31 March 2015

Following a tough few years for European stock markets the managers are able to find plenty of attractively-valued, cash generative companies with high yields. The opposite is the case in the US following a strong run for stock markets. However, having a bias to Europe over the US during the past year has been negative for performance, given the latter's superior performance. A bias to higher risk smaller and medium-sized companies has all been negative for performance during a year when larger companies have tended to perform better. However, past performance should not be seen as an indicator of future returns. Investors should note the fund is concentrated, with just 28 investments, meaning each can contribute significantly to performance, but it is higher risk.

Performance of the Liontrust Global Income Fund over the past year

Past performance is not a guide to the future. Source: Lipper IM to 01/05/2015

Full year performance figures before this date are unavailable

Our view on this fund

James Inglis-Jones and Samantha Gleave look to invest in high-yielding companies viewed as having unusually strong cash flows, but where investors have low expectations for profits. They believe strong cash flows are a good indicator of strong growth in future reported profits. We view this as a sensible approach, but we would like to see them build a longer track record of managing a global income fund before considering the fund for inclusion on the Wealth 150 list of our favourite funds across the major sectors.

The fund's charges can be taken from capital, which can increase the yield but reduces the potential for capital growth.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.