- Core infrastructure was the biggest contributor to performance in Q3
- Core property and cyclical real assets were also positive contributors over the period
- Diversifiers were marginally positive while cash was flat
Over the three months to 30 September 2024, the Diversified Real Assets Fund (the ‘Fund’) returned 6.0%, (Class A accumulation share class, net of fees).1
Core infrastructure was the main contributor to the Fund’s performance in Q3 2024, driven largely by social infrastructure holdings. Tritax Eurobox recorded the largest positive return, while Cordiant Digital Infrastructure was also a positive performer over the period. Global infrastructure also contributed, with a positive return by Pantheon Infrastructure, while renewable infrastructure recorded a positive return due to Renewables Infrastructure Group and Greencoat UK Wind.
Core property also performed well over the three months to the end of September with a positive contribution from LondonMetric Property. However, property investment and development company Segro weighed marginally on performance in Q3 2024, as did transportation services company CSX Corporation. UK gilts were flat over the period.
Outlook
Overall positioning in our strategy remains the same from previous quarters, a focus on sustainable income generating infrastructure and specialist REITs businesses that have continued to deliver growing dividends.
Interest rates are finally beginning to take note of the falling inflation in the US and UK and are reflecting a more benign environment, with a fairly dovish US central bank focused on a soft landing. In the UK, base rates have remained a bit more stubborn as inflation has been slightly stickier but the overall narrative is consistent with the US.
Our businesses with their high running dividend yields and defensive characteristics will be favoured by investors in a declining rate environment. If history is any guide, we can expect to generate double digit returns from our REIT and infrastructure holdings owing to their starting attractive valuations of double-digit discounts versus book value or Net Asset Values (NAVs) and a supportive rate environment.
Our names across our strategy continue to benefit from buybacks to support share prices. Furthermore, we are seeing cheap valuations entice both public and private companies with share offers, or cash offers in the case of private equity, which helps re-rate the entire sector but also has more directly benefited some of our holdings such as Tritax Eurobox with interest from Segro and Brookfield.
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.
