- Six main themes currently run through the fund
- The managers believe these themes will transcend stock market cycles and drive long-term company performance
- Performance has been good overall, but lacklustre more recently. The fund currently yields 4.7%, though this is not an indication of future income
There are undoubtedly long-term global themes at play that many companies have the potential to capitalise on. However, identifying how these themes will play out, and which companies are best-placed to benefit is no easy task.
There are many factors that can affect a company’s performance, both over the long and short term, that might mean at certain times a broad theme has little baring on share prices. Likewise, themes come in and out of favour, with the fortunes of whole sectors ebbing and flowing with them.
While Stephen Bailey has achieved a better return than the UK stock market overall, and dividend growth has been good, recent performance has been weaker. The fund has delivered a return broadly in line with the stock market over the past five years*, but it has lagged the IA UK Equity Income Sector average with more volatility along the way. Please remember, past performance is not a guide to the future.
The thematic approach used by Stephen Bailey and his co-manager, Jamie Clark, makes this fund somewhat unique. It might suit investors who want exposure to long-term themes with an income-focused approach. The recent deterioration in performance, coupled with some doubt over the ability of the managers to select the companies best able to capitalise on their investment themes, means this fund is not currently being considered for the Wealth 150 list of our favourite funds for new investments.
Liontrust Macro Equity Income - performance over 5 years
Past performance is not a guide to the future. Source: Lipper IM* to 31/03/2018
|Annual percentage growth|
| Mar 2013 -
| Mar 2014 -
| Mar 2015 -
| Mar 2016 -
| Mar 2017 -
|Liontrust Macro Equity Income||16.5%||9.3%||-3.4%||14.3%||-1.6%|
|IA UK Equity Income||13.4%||7.8%||-1.3%||14.9%||0.3%|
Past performance is not a guide to the future. Source: Lipper IM to 31/03/2018
The themes running through the fund are broad, which means there is exposure to a variety of different sectors. The portfolio is concentrated overall though, which allows each company to contribute significantly to performance, but it is higher-risk.
Below I briefly highlight the six main themes the managers are positive on, and some of the companies they think will benefit.
1. Population aging (approx. 29% of the fund) – we are living longer and this is likely to result in additional demand for a range of products and services.
The managers are particularly positive on the opportunity this presents for some financial companies, such as Legal & General and Aviva, which could benefit from additional demand for pensions and savings products.
2. Infrastructure spending (22%) – companies with the potential to capitalise on the need to spend more on infrastructure worldwide.
To capitalise on this theme the managers have invested in mining companies, including Rio Tinto and Glencore, as well as house builders and companies that supply materials to the sector, including Taylor Wimpey and Forterra, the brick maker.
3. Data growth (16%) – we are consuming more and more digital content though our smart phones, tablets and TVs.
Potential beneficiaries from this theme are telecoms companies, such as Vodafone and BT, according to the managers.
4. Rising interest rates (12%) – the US has already started raising interest rates and the UK is widely expected to follow this year.
Banks should benefit from this theme as they earn more on the money they lend out when interest rates rise. HSBC features in the fund.
5. Global pharmaceuticals (12%) – demand for medicines and healthcare is predicted to increase globally, especially in less developed countries.
The managers hold several pharmaceutical companies to benefit from this theme, including GlaxoSmithKline and AstraZeneca.
6. Digital economy (6%) – a digital presence, via a website or app, is vital for most companies these days.
A wide range of companies could potentially benefit from this theme, not least the producers and distributors of high-quality content. Within this theme the managers have an investment in Bloomsbury, the publisher. This is an example of them using their flexibility to invest in higher-risk smaller companies.
Please note charges can be taken from capital. This boosts income, but reduces capital growth. The fund also holds shares in Hargreaves Lansdown plc.