- Positive highlights included global infrastructure equity, gold and infrastructure bonds
- Chenier Energy is strongest contributor to performance
- Diversifiers were marginally positive while cash was flat
Over the three months to 31 December 2024, the Diversified Real Assets Fund (the ‘Fund’) returned -6.3%, (Class A accumulation share class, net of fees).1
Some holdings in global infrastructure equity, gold and infrastructure bonds were the positive highlights in a quarter that saw core property, core infrastructure, cyclical real assets and diversifiers slip. The Federal Reserve’s monetary policy outlook turned more hawkish during the quarter and a rise in global government bond yields created a headwind for real assets.
Cheniere Energy was the strongest contributor to returns overall, with further support from Digital Realty Trust, Equinix, iShares Physical Gold and Transport For London April 2025.
Core property, which had performed well in the previous quarter, was the most significant detractor from returns, with speciality REITs and industrials in negative territory. Home REIT and LondonMetric Property were poor performers here. Other poor performers included Foresight Environmental Infrastructure and Renewables Infrastructure Group in core infrastructure, and SEGRO and American Tower in cyclical real assets.
Outlook
Our strategy remains consistent with previous quarters, focusing on sustainable, income-generating infrastructure and specialist REITs that have consistently delivered growing dividends.
As central banks have shifted to a modestly hawkish bias, especially in the US, global long-term interest rates have become volatile, which has also impacted returns in the fourth quarter owing to higher gilt yields. We believe that while US economic growth has been strong and resilient, the UK economy faces more challenges as evidenced by the contraction in growth experienced in September and October as well as only a 0.1% uptick in December, which was below consensus estimates.
We expect this to reset market expectations, especially in the case of the Bank of England to cut rates more aggressively, which will be positive for our UK-listed defensive infrastructure and REIT names. Furthermore, a weakening growth backdrop has historically been positive for our strategy relative to risky assets such as equities due to the more stable earnings and dividend profiles of our companies.
We continue to believe that current discounts to book value or net asset values (NAVs) and an attractive dividend yield, especially for our investment companies exposure, has the potential to drive attractive total returns for our fund over the medium term. Additionally, we maintain conviction in our cyclical names that we expect to continue to benefit from structural growth themes such as the ongoing demand for datacentres.
Our holdings continue to benefit from share buybacks, which help support share prices. Additionally, the attractive valuations in the market are drawing interest from both public and private companies, with share or cash offers—particularly from private equity. We note and encourage the recent activism seen across the broader investment trust sector space and we continue to actively engage with boards to ensure best outcomes for our holdings and the fund.
We believe that for most clients, holding a diversified portfolio that includes defensive real assets alongside traditional equities and bonds can offer strong diversification, especially in a scenario of economic or earnings slowdown.
KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
■ 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.
The risks detailed above are reflective of the full range of Funds managed by the Multi-Asset Team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
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.
DISCLAIMER
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.
It 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.
This information and analysis 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, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, 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. 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.
