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Liontrust - European Income - Olly Russ

The European Income process

Investment philosophy

The fund managers have three objectives in managing the funds:

  1. 1

    A yield that is higher than the market;

  2. 2

    An income stream that grows in the long run faster than inflation; and

  3. 3

    Long-term capital growth that is at least in line with inflation.

The fund managers seek to achieve these aims through investing in growing companies with low capital requirements that pay out expanding dividends. They use dividend growth as a proxy for earnings growth – and expect to see dividends rising over time as companies increase pay outs to shareholders while earnings grow. Since dividends are paid out in cash, companies with increasing pay outs will need to produce high quality cash earnings, with less scope for artificial inflation through financial manipulation or lower quality numbers.

The fund managers also expect the value of companies with strong and growing dividends to increase at least in line with inflation over the long term. They believe a company targeting shareholder pay outs should help improve management focus on capital discipline, which can help to sustain higher valuations and avoid value-destroying actions.

They are typically more stable, mature and secure companies, whose asset base and business has been built up over many years and is defended by an economic moat – an economic edge, competitive advantage or assets that are hard to replicate by new entrants, such as a strong brand, niche products or a dominant market position. 

Is the lack of Value the biggest risk to your portfolio?

Value investing has underperformed growth for the past 12 years, save for a few sharp rallies. Olly Russ and Oisin O’Leary analyse whether it is time for investors to increase their exposure to European value.

Investment process

Owning the types of companies described above may not alone produce market outperformance. To produce superior risk-adjusted returns, the fund managers look for companies with these characteristics that are also undervalued. They are generally seeking quality companies (cash generative and well established businesses with hard-to-replicate assets) with a good record of dividend growth and where the market has mispriced or underestimated their future earnings potential. In searching for mispriced assets, the fund managers look to take advantage of:

  1. 1

    Growth opportunities: where the market underestimates earnings/dividend growth

  2. 2

    Value opportunities: where the market undervalues the expected earnings or dividend potential

  3. 3

    Special situations: where there are opportunities for corporate change that will drive improved dividends

Process document

Further information can be found in the Liontrust European Income Process document.


Liontrust European Enhanced Income Fund

For more information on the use of covered calls and foreign exchange hedging in the Liontrust European Enhanced Income Fund.

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The European Income team
The European Income team

Olly Russ (right) and Oisin O’Leary (left) have over 25 years of combined investment and capital markets experience. Olly joined Liontrust in July 2016, having started his career at investment boutique Orbitex in 1998. Oisin joined Liontrust in June 2017, having previously been an investment analyst at Argonaut Capital Partners across the company’s range of funds from September 2015.

Read more

Is the lack of Value the biggest risk to your portfolio?

Olly Russ & Oisin O'Leary

Value investing has underperformed growth for the past 12 years, save for a few sharp rallies. Olly Russ... Read more

Latest fund updates

European Income

Read the latest fund updates for the Liontrust European Income funds.
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Rayner Spencer Mills - R Rated Fund
Liontrust European Income Fund
Rayner Spencer Mills rated

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in Funds managed by the European Income team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. Investment in the Liontrust European Enhanced Income Fund writes out of the money call options to generate additional income. These call options will be “covered”. Unitholders should note that potential capital growth of the Fund would be capped if these call options are exercised against the Fund and the Fund’s capital returns could therefore be lower than the market in periods of rapidly rising share prices.


The information and opinions provided 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. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.


Citywire information is proprietary and confidential to Citywire Financial Publishers Ltd ('Citywire'), may not be copied and Citywire excludes any liability arising out of its use. © 2019 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.  Past performance is no guarantee of future results.

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