Distribution fund from Liontrust this year

Liontrust is to launch a distribution fund by the end of November. Jeremy
Lang will manage 40% of the portfolio, using the same approach as his First
Income fund, while 60% will be outsourced to State Street Global Advisors
(SSgA), which will track the FTSE All-Stocks Gilts index.

However, the decision to launch the distribution fund is separate from the
ongoing strategic review of whether Liontrust should offer a fund in a new
asset class and recruit more fund managers. In addition, Barclays Global
Investors has been replaced by SSgA as manager of the group’s £75m Top 100 index-tracking fund.

The All Stocks Gilts index measures gilts with maturities of between five
and 15 years, says Liontrust marketing director Jonathan Harbottle: “The
index has performed very well against actively managed gilt funds and, with an annual fee of 1.25%, the fund is very cheap. By combining the index with the First Income approach, investors can access Jeremy without all the risk of his equity fund. It will also allow us to make quarterly distributions.

“We chose gilts rather than corporate bonds because they provide greater
liquidity and more security to investors. We saw an opportunity to enter the
space in the market previously occupied by with-profits bonds by launching
the distribution fund.”

Harbottle says SSgA was chosen partly because of Liontrust’s relationship with it. It has acted as trustee and custodian to Liontrust’s funds in the past, and was chosen to manage the Liontrust Top 100 fund at the end of September. “BGI wanted to raise its charges for managing the Top 100 fund, so we decided to look for another manager and selected SSgA, which matched Barclays’ previous fee,” says Harbottle.

The review was launched because Liontrust declared that it will reach capacity on its current funds when it gets to £6-£7bn in assets under management. It currently has £5bn in assets.