Liontrust Global Dividend Fund

The Liontrust Global Dividend Fund continues to invest in innovative global leaders, buying companies on the right side of AI at cyclically depressed prices ahead of a new innovation cycle.

• February was a volatile month, marked by heightened uncertainty as companies and investors navigated shifting trade policies, mixed economic signals, and the rapidly evolving AI landscape.
• Volatility throughout the month highlighted the need to focus on fundamentals amid market uncertainty, with earnings reports offering insights into policy shifts, trends, and growth strategies.
• Chinese stocks were the top contributors to Fund performance in February, with Alibaba, BYD, and Tencent performing strongly amid a broader market rally, while Constellation Energy, TSMC and UnitedHealth were among the key detractors.

Performance overview

The Liontrust Global Dividend Fund returned -3.7% in February, placing it in the 4th quartile of peers behind the IA Global Equity Income sector average of -0.8% and the MSCI World Index which returned -2.0% (both comparator benchmarks).

Longer term performance remains strong, with the Fund having returned 127.1% since manager inception (31.08.17), third ranked fund in the sector ahead of the IA Global Equity Income sector return of 74.8% and the MSCI World Index return of 124.5%.

Market backdrop

February proved a volatile month. Markets characterised heightened uncertainty as companies and investors navigated dynamic trade policies, mixed economic signals, and the rapidly evolving AI landscape – all against the backdrop an ongoing FY24 earnings season.

The Trump administration’s widely anticipated tariff announcements – and subsequent retaliatory responses – proved the dominant narrative throughout the month. While US tariffs will initially focused on China, Mexico, and Canda, commentary throughout the month indicated these could be implemented more broadly going forward, including against the EU, though this dynamic remains fluid and subject to further negotiation. The first of these tariffs, a 10% duty on Chinese imports, was implemented early in the month, though the majority were set to come in to effect in early March. This dominated headlines coming in to month end, and – against a backdrop of slightly hawkish Fed commentary and mixed economic data – saw the VIX volatility index spike on heightened uncertainty regarding potential secondary effects such as higher inflation, consumer weakness, and a slower pace of interest rate cuts in the year ahead.

This uncertainty spilled over to equity markets, weighing particularly heavily on US technology stocks with significant exposure to affected regions. Pressure was compounded by lingering concerns following DeepSeek’s late-January breakthrough and news that Microsoft had cancelled several long-term data centre leases, raising fears that model efficiency gains could dampen the pace of AI infrastructure buildout. This led to increased caution towards technology stocks, particularly AI-adjacent companies and those in the semiconductor space, with the NASDAQ 100 down over 5% in the final two weeks of the month.

Despite this uncertainty, we continue to see strong evidence that these fears are misdirected and overblown. Hyperscalers reaffirmed their infrastructure plans with ramping AI-related capex, while Nvidia reported outsized demand for its latest Blackwell chips – sales exceeding expectations as the company races to expand capacity to meet demand from accelerating AI workloads. We also continue to see mounting evidence of this nascent technology’s potential, a growing number of companies reporting tangible benefits to their top- and bottom-lines from AI adoption.

Conversely, Chinese stocks had a particularly strong month, the DeepSeek breakthrough is seen as a testament to the country’s AI strength. This drove a rush into Chinese technology stocks on expectations of AI-driven growth, leading the Hang Seng Index to climb over 13% in February, reaching its highest level in two years. This optimism was bolstered by a strong earnings update from tech-giant Alibaba, the company highlighting continued strong demand for AI-related products while joining western peers in ramping AI capex spend – a welcome signal given the company’s proximity to DeepSeek’s developments.

Meanwhile, AI advancements continued at pace. Having made its latest reasoning model – o3 mini – available at the end of January, OpenAI outlined its roadmap to GPT-5 and introduced its latest GPT-4.5 base model. Anthropic launched its first reasoning model, while Google signalled major upcoming upgrades to its Gemini series. Notably, xAI released its latest reasoning model ‘Grok 3’, trained on a 100,000 Nvidia H100 GPU cluster – the first model released trained on this next-level of scale. The record-speed at which this model was trained was particularly impressive, underscoring the benefits of pre-training scaling and agility in model development. xAI is already training its next model on an expanded 200,000 GPU cluster, which should further accelerate development, particularly as two new scaling laws – post-training scaling and inference-time scaling – begin to play a greater role. Post-training scaling allows models to keep improving even after their initial training, while inference-time scaling lets them use more computing power when needed to enhance reasoning in real time. These advancements are critical to making AI systems more capable, efficient, and widely useful, supporting broader adoption across industries. They also underpin why we continue to see strong investment in this space, as AI infrastructure demand continues to ramp with these new scaling laws.

Company updates

February highlighted the importance of staying focused on company fundamentals amid ongoing market uncertainty. Helpfully, the ongoing earnings season provided direct insight from companies as to how they are navigating regulatory and policy shifts alongside structural trends and longer-term growth strategies. These insights are supplemented by our quarterly research trips, with our team in the US visiting a number of companies in key innovation hubs of New York and Silicon Valley at the time of writing. Importantly, we continue to see strong evidence that innovative global leaders remain on the right side of major emerging structural trends, with strong fundamentals that position them well to be winners in the new innovation cycle.

Unsurprisingly, Chinese stocks were the top contributors to Fund performance in February, with Alibaba, BYD, and Tencent performing strongly amid a broader market rally. Alibaba and Tencent benefited from improved investor sentiment towards Chinese technology stocks following the DeepSeek news in late January, as investors reassessed the AI potential of China’s leading platforms. This positive sentiment was reinforced by a strong Q4 update from Alibaba mid-month, with group revenues accelerating to +8% year-on-year and exceeding expectations across all divisions. The company’s core retail business remains in good health, growing 9% domestically and 36% internationally, driven by strong cross-border performance. More importantly, its cloud division, an area of growing focus, grew 13% year-on-year as demand for public cloud and AI products continued to scale. AI-related revenues maintained their meteoric triple-digit year-on-year growth for the sixth consecutive quarter, helping drive margin expansion at the group level. In contrast to the negative sentiment around future AI build-out plans, Alibaba signalled its intent to continue investing aggressively in AI infrastructure, having tripled its 2024 capex spend to $10 billion. CEO Eddie Wu underscored this commitment, stating that the pursuit of artificial general intelligence is now the company’s “primary objective” and outlining plans to invest more in AI and cloud infrastructure over the next three years than in the past decade. The company aims to advance multi-modal foundation models and native applications while expanding its open-source initiatives and integrating AI across its existing businesses to drive earnings growth across the wider group.

Meanwhile, BYD rose sharply after announcing that its “God’s Eye” self-driving system would be standard across 21 models, including lower-priced vehicles. Unlike Tesla’s Full Self-Driving (FSD) system, which requires an additional fee, BYD’s smart driving feature is offered at no extra charge. This was well received by the market and underscores the innovation at the core of the company: BYD is driving down the cost of EVs and smart driving for customers, expanding the market and growing its market share. This is also reflective of the company’s formidable competitive positioning, the company is able to achieve lower costs of production thanks to its highly efficient, vertically integrated model, which include in-house battery production and large-scale, highly automated manufacturing. At a time when legacy automakers are struggling to transition to EVs – cutting jobs and losing market share – BYD continues to scale, reinforcing its position as the global leader in the modern auto industry. This all supports strong earnings growth ahead, while providing a solid foundation for continued dividend growth – building on its astonishing 70% five-year dividend CAGR.

Elsewhere, both Eli Lilly and Novo Nordisk – global leaders in revolutionary GLP-1 therapies – were also among top contributors to performance in the month. Currently, fewer than 1% of the estimated two thirds of U.S. adults who are overweight or obese receive GLP 1 treatment; yet market forecasts suggest the category could reach $100 billion by 2030, with Novo Nordisk and Eli Lilly together commanding around 85% market share. Both companies continue to capitalise on this growing opportunity, aggressively investing in capacity expansion and next-generation drugs to meet ramping demand which is already showing up in the numbers. Novo Nordisk, for instance, doubled weekly prescriptions for its flagship obesity drug, Wegovy, to approximately 200,000 in the US while serving 1.2 million patients overall, and recent trial results underscore the strength of its pipeline.

Meanwhile, Lilly reported a 45% revenue increase to $13.5 billion, driven by strong performance in its core GLP 1 portfolio – notably Mounjaro and Zepbound – with significant volume gains and expanding market share in the US. By targeting weight loss and associated conditions, GLP 1 therapies not only promise to reduce overall healthcare costs but may also eventually address other diseases such as heart failure, sleep apnoea, and even addiction. Both companies been growing earnings and dividends strongly – with five year dividend CAGRs of 19% for Novo and 15% for Lilly – and remain at the forefront of the GLP 1 revolution, positioning them well for continued strong growth in the years ahead.

In a reversal of fortunes from January, Brookfield Renewable Partners emerged as a strong contributor to February performance while Constellation Energy was the leading detractor. Brookfield, a global leader in renewable energy, rebounded after its January sell off, having been caught up in broader concerns over potential policy changes, including tariffs and tax credits, that might negatively impact renewable energy providers. The company quashed these worries in a robust trading update coming in to the month, emphasising that any adjustments would simply be passed on to customers. With its underlying fundamentals intact – its fourth quarter update showing funds from operations growing 21% year on year, with management citing unprecedented demand from technology companies for reliable, low cost power - and an established development pipeline of 200,000 megawatts, we see the company’s financials accelerating in the years ahead.

Meanwhile, Constellation Energy, the world’s leading nuclear energy provider, sold off later in the month despite earlier posting a strong earnings update, beating expectations with 38% EPS growth supported by a favourable Nuclear PRC portfolio and efficient cost management, while conservatively maintaining its 2025 guidance with targeted 10% earnings and dividend growth. Importantly, Constellation remains well positioned to benefit from structural demand for clean energy, with ramping AI data centre requirements adding to robust needs driven by broader electrification trends and an overall supply/demand imbalance. The company also received a supportive regulatory update later in the month, the Federal Energy Regulatory Commission unanimously voting to review its late 2024 ruling against data centre co location, with more details expected in late March. Given its continued strong fundamentals and positive structural backdrop, we took the opportunity to increase our holding in the fund.

In addition to Constellation Energy, other key detractors to February performance included TSMC and UnitedHealth. TSMC was caught up in broader negative market sentiment as investors reassessed exposure to the chip sector amid combined concerns over DeepSeek’s low‑cost capabilities and uncertainty stemming from proposed semiconductor tariffs. These factors, coupled with a cautious outlook on AI infrastructure investments, contributed to a notable sell‑off in the stock. Meanwhile UnitedHealth fell after reports emerged of a DOJ investigation into its Medicare billing practices. We currently await further clarity on the enquiry, and continue to review our position in the company.

Trading activity

Amid these company updates and market developments, we make sure to maintain our strict valuation discipline, trimming or exiting positions as they approach our target price and redeploying capital in to companies where we see attractive upside opportunities based on our target prices. In February, we took the opportunity to top up stocks that had been hit hard in the month, including Eaton and Schneider Electric – global leaders in electrification and automation solutions for industries and data centres. Both companies recent earnings updates shrugged off DeepSeek-related concerns, highlighting significant multi-year order backlogs and accelerating demand for their increasingly interconnected offerings. We also topped up positions in the likes of Nvidia and Blackstone, while trimming strong performers such as Alibaba and Visa.

We also opted to exit our positions in Impax Asset Management, due to a deterioration in fundamentals, and Texas Instruments, where emerging dynamics in the automotive market – particularly BYD’s increasing dominance – pose a risk to its end-market growth opportunity going forward. We redeployed this capital to re-initiate a position in BlackRock, a global leader in asset management. The firm's scale and resource advantages position it well to capitalise on structural trends, including the growing adoption of AI across financial markets. BlackRock has been investing in AI-driven analytics to enhance its portfolio management and risk assessment capabilities, reinforcing its leadership in data-driven investment strategies. With a strong track record of shareholder returns – evidenced by its 8.5% five-year dividend CAGR – the company is well positioned to deliver sustained earnings and dividend growth in the years ahead

Looking forward

March looks set to remain dynamic, with markets digesting the impact of newly implemented U.S. tariffs and the likelihood of retaliatory measures from affected trading partners. Given ongoing geopolitical dynamics, we also expect further policy announcements from various global bodies, particularly the US given we remain within the first 100 days of the new Trump presidency.

Meanwhile, China’s National People’s Congress (NPC) meeting early in the month will provide insight into key economic priorities for the year ahead, including the potential for further stimulus measures. Policymakers are expected to focus on bolstering domestic consumption, addressing structural challenges in the property sector, and supporting high-tech industries—including AI, which remains a core strategic priority.

More broadly we expect to see ongoing developments in the AI space, with competitive advantages continuing to accrue to leading early adopters across sectors. Despite this dynamic backdrop, we remain optimistic about the opportunities for innovative global leaders as we enter this new innovation cycle. As always, we will maintain our valuation discipline, focusing on companies that can deliver strong earnings and dividend growth by capitalising on structural trends while trading at attractive valuations.

Discrete years' performance (%) to previous quarter-end:

*Source: FE Analytics, as at 31.12.24, C accumulation share class, total return, net of fees and income reinvested. Fund inception date is 31.12.01; the current fund managers’ inception date is 31.07.17.

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.
■ This Fund may have a concentrated portfolio, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the Fund's value than if it held a larger number of investments.
■ 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 level of income is not guaranteed.

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.