- Core infrastructure was the biggest contributor to performance in Q2
- Cyclical real assets weighed on performance in Q2, while core property was flat
- Diversifiers were marginally positive over the period
Over the three months to 30 June 2024, the Diversified Real Assets Fund (the ‘Fund’) returned 1.8%, (Class A accumulation share class, net of fees).1
Core infrastructure was the main contributor to the Fund’s performance in Q2 2024, driven largely by social infrastructure holdings. In particular Cordiant Digital Infrastructure was a positive performer over the period, followed by GCP Infrastructure Investment. Global infrastructure also contributed slightly, due to a small positive return by Pantheon Infrastructure. Renewable infrastructure was largely flat.
Diversifiers was a marginally positive contributor to performance, due to a small uptick in gold, and in particular our holding in iShares Physical Gold.
Cyclical real assets weighed on performance in Q2 2024, with global property equity the largest detractor to the Fund’s performance over the period. Within this our holding in Prologis was negative. Meanwhile property debt dragged slightly on performance, thanks to our holding in Real Estate Credit Investments.
Core property was largely flat in Q2, with speciality REITs contributing slight positive returns to the Fund, driven in particular by our holding in Tritax EuroBox Euro.
Outlook
Investors are playing a “wait and see” game as interest rates have continued their volatile streak with the UK 10-year gilt finishing the quarter modestly up.
In this backdrop, our positioning remains largely unchanged with an overweight in infrastructure – social and renewables and specialist real estate that provide defensive characteristics in an economic slowdown, but also a significant return upside in a more normalised rate environment.
While this quarter has been positive for our Fund, it has been a testing time for the sector over the last 18 months. We believe that the interest rate correction will happen abruptly and trying to be too short term tactical with our positioning risks missing out on a strong rally in our holdings. Patience remains key for us, especially as our holdings exhibit robust fundamentals and with an attractive current yield of 5.7% for the Fund, investors are being paid to be patient.
It is also encouraging to see the buyback trend continue, especially among our infrastructure and renewable holdings to support share prices. Not only are companies finding value at buying their own stock at these prices, but we continue to see private equity interest for our holdings as seen by news of a potential offer for Tritax EuroBox by Brookfield which saw a large re-rating in its share price.
We believe that for most clients owning a diversified portfolio which contains defensive real assets alongside their traditional equities and bonds can provide a good source of diversification, especially in an economic and earnings slowdown scenario.
KEY RISKS
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund. Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result; The creditworthiness of a bond issuer may also affect that bond's value. Bonds that produce a higher level of income usually also carry greater risk as such bond issuers may have difficulty in paying their debts. The value of a bond would be significantly affected if the issuer either refused to pay or was unable to pay. This Fund may have a concentrated portfolio, i.e. hold a limited number of investments or have significant sector or factor exposures. If one of these investments or sectors / factors fall in value this can have a greater impact on the Fund's value than if it held a larger number of investments across a more diversified portfolio. The Fund may encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings. Outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties (e.g. International banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails.
DISCLAIMER
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
This 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
