Liontrust Assessment of Value Report - Flipbook - Page 82
Liontrust Income Fund
The Fund, which has been managed by Robin Geffen since launch
in December 2002, aims to deliver a net target yield of at least the
net yield of the FTSE All Share index every year, with the potential
for long term (5 years or more) capital growth. The Fund, which
has the ability to invest up to 20% in income opportunities outside
the UK, seeks companies that offer the most attractive dividend
growth potential by focusing on those with strong free cash flow,
balance sheets and earnings. The portfolio is divided into three
distinct silos to negate any major style bias: steady eddies, hidden
fruits and tactical plays.
Performance
Overall value
assessment
We have evaluated the
Fund against all seven
criteria in our assessment
of the value it provides to
investors. While the Fund
has received an Amber for
comparable market rates,
we have concluded that
the Fund has performed
in line with expectations
for the remaining criteria,
delivering overall value to
investors including through
the investment performance.
Go back to the Summary
of the Assessment of
Value table
We have assessed the investment performance of the Fund against both its
stated investment objective, as well as against the benchmarks that are set out
in its prospectus. We considered whether the Fund has performed how we and
investors would expect it to, given the market conditions it has been operating
under, and its investment philosophy, strategy and process.
The Liontrust Income Fund returned 38.0% over the five years to 31 August 2021,
outperforming the FTSE All-Share Index and IA UK Equity Income sector (both
comparator benchmarks) respective returns of 33.3% and 27.1%.* The Fund has
also consistently yielded more than the Index, meeting its income objective.
The Fund’s outperformance over the period was driven by a variety of factors.
Arguably, the most important has been the types of companies the Fund invests
in, ‘dependable income stocks’, which are companies that exhibit three distinct
characteristics: a structural growth proposition, competitive advantage and a
dividend growth runway. It is this process that has enabled the Fund to generate
a consistent stream of income for clients without sacrificing capital.
The Fund’s initial screening process – which centres on companies with high
dividend coverage and low leverage – has also helped to shield our investors
against the worst of dividend cuts seen across the market during the Covid-19
pandemic. Meanwhile, its liquidity screen has ensured the Fund remains large
cap and liquid in nature, allowing the manager the flexibility to rotate positions
with relative ease.
Another driver of performance is the Fund’s differentiated approach to portfolio
construction. To negate style bias and ensure stock selection is the primary
driver of the Fund’s active risk, the portfolio is spilt into three evenly weighted
silos of Steady Eddies, Hidden Fruits and Economic Recovery stocks. It is this
diversification that has ensured the portfolio performs across the market cycle;
seeking to protect capital more effectively than peers in down markets yet
participating in cyclical recovery.
Finally, the Fund’s US holdings have been a key contributor to performance
over the past three to five years. Rather than being generated from a topdown asset allocation perspective, the Fund’s US exposure is dictated by the
strong dependable income credentials of a number of large cap tech stocks not
replicable in the UK market.
This document is intended to be for information purposes only. It is not
marketing material.
*Source: Financial Express, as at 31.08.21, total return, net of fees, income reinvested.
82 - Liontrust Assessment of Value Report