Mark Dampier: Tide may be turning for Liontrust income fund

The Analyst

Many companies go through their own unique business cycle, experiencing prosperous and less prosperous times alike. Investment companies are no different. At times, they seem to have the in-vogue funds and the performance to boot, while at other times they find themselves deeply out of favour. This can be for a variety of reasons, not least as a consequence of fund managers leaving, thus creating a vacuum within the company.

Liontrust knows this only too well. It has certainly been through the mill over the past 18 months, partly because of the departure of two of its leading fund managers. Indeed, Liontrust is quoted on the stock market and you only have to look at the performance of its share price to see how badly this hit the company. The loss of so much momentum is like a boat losing the wind from its sails and fighting a strong tide. Yet I get the feeling the tide is now turning and, with the wind back in its sails, Liontrust may just be coming about.

The truth of the matter is that Liontrust had more than just two good fund managers. It had a core of exceptionally talented individuals who were somewhat overshadowed by the fund managers who originally helped to set up the company. I thought today I would draw your attention to the Liontrust First Income Fund. It went through a sticky time, even with one of those founding managers at the helm, but I think it is just beginning to shine once again.

Since 25 March 2009 the fund has been managed by Gary West and James Inglis-Jones, a pair of highly experienced fund managers who are well known within the industry. They have brought their own process into the running of the fund, which under the previous "star manager" experienced periods of brilliance, only to be followed by periods of particularly poor performance.

What is interesting about Mr West and Mr Inglis-Jones is that they don't spend their time trying to arbitrarily forecast the future following meetings with company management or after speaking to analysts. Both believe such activities to be a waste of time. Instead, they spend their time studying cash flow. This may sound rather geeky, yet they are essentially looking at what makes a company tick, appreciating that cash flow is the true lifeblood of any company. Using this approach, they feel they are in a better position to gauge exactly what a company can deliver in the years to come. It particularly suits running an income fund as dividends will ultimately be paid out of cash. Weakness in cash flow is often a harbinger of bad news and an early warning of problems.

Mr West and Mr Inglis-Jones are proving themselves more than capable of competing favourably with their peers. The fund has risen 44.61 per cent during their tenure while the sector is up 36.48 per cent. Of course, this is a very short timeframe, but it hasn't been an easy time for income managers with so many dividends being cut. I should say at this point that they do hold BP shares, but given stronger dividend performance from their other companies, they should be able to pay an increased dividend on the fund during the year ahead. This gives the fund a prospective yield of 5.5 per cent for the year to June 2011 – one hell of a starting yield when you consider where interest rates are currently.

I realise the capital has fluctuated no end but, when investing for the long term, such fluctuations over shorter periods should be of less concern when receiving a good income stream. Also bear in mind that most people who put money into cash deposits and live off the income gradually see their capital eroded by inflation.

So when you have a moment, take a look at Liontrust First Income. It is in a competitive sector, but remember my opening observation: investment companies go through cycles and maybe the cycle is now turning in favour of Liontrust.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.h-l.co.uk/independent

Compare with the Independent: See how much you could save by switching credit cards. Compare now

Arts & Entertainment
Madonna in her music video for 'Like A Virgin'
music... and other misheard song lyrics
News
Waitrose will be bringing in more manned tills
newsOverheard in Waitrose: documenting the chatter in 'Britain's poshest supermarket'
News
The energy drink MosKa was banned for containing a heavy dose of the popular erectile dysfunction Levitra
news
News
Much of the colleges’ land is off-limits to locals in Cambridge, with tight security
educationAnd has the Cambridge I knew turned its back on me?
VIDEO
Sport
Australia's Dylan Tombides competes for the ball with Adal Matar of Kuwait during the AFC U-22 Championship Group C match in January
sportDylan Tombides was diagnosed with testicular cancer in 2011
News
Ida Beate Loken has been living at the foot of a mountain since May
newsNorwegian gives up home comforts for a cave
Extras
indybest10 best gardening gloves
News
Russia's President Vladimir Putin gives his annual televised question-and-answer session
peopleBizarre TV claim
Arts & Entertainment
tvIt might all be getting a bit much, but this is still the some of the finest TV ever made, says Grace Dent
Arts & Entertainment
Comedian Lenny Henry is calling for more regulation to support ethnic actors on TV
tvActor and comedian leads campaign against 'lack of diversity' in British television
News
Posted at the end of March, this tweeted photo was a week off the end of their Broadway shows
people
News
peopleStar to remain in hospital for up to 27 days to get over allergic reaction
Arts & Entertainment
The Honesty Policy is a group of anonymous Muslims who believe that the community needs a space to express itself without shame or judgement
music
News
Who makes you happy?
happy listSend your nominations now for the Independent on Sunday Happy List
Life & Style
life
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Helpdesk Engineer Apprentice

    £150.00 per week: QA Apprenticeships: This company has been providing on site ...

    Telesales & Sales Support Apprentice

    £221.25 per week: QA Apprenticeships: This company is a well established Inter...

    Client Relationship Manager - SQL, Python

    £40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

    **Financial Services Tax**

    £35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

    Day In a Page

    How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

    How I brokered a peace deal with Robert Mugabe

    Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
    Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

    British Muslims's Happy video attacked as 'sinful'

    The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
    Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

    Michael Williams: Do as I do, not as I pray

    Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
    A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

    A History of the First World War in 100 moments

    A visit to the Front Line by the Prime Minister's wife
    Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

    Jenny Collier: 'Sexism on stand-up circuit should be extinct'

    The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
    Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

    Cannes Film Festival

    Ken Loach and Mike Leigh to fight it out for the Palme d'Or
    The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

    The concept album makes surprise top ten return

    Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
    Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

    Lichen is surprise new ingredient on fine-dining menus

    Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
    10 best baking books

    10 best baking books

    Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
    Jury still out on Manchester City boss Manuel Pellegrini

    Jury still out on Pellegrini

    Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
    Ben Stokes: 'Punching lockers isn't way forward'

    Ben Stokes: 'Punching lockers isn't way forward'

    The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
    Mark Johnston: First £1 million jackpot spurs him on

    Mark Johnston: First £1 million jackpot spurs him on

    The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
    Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

    Ricky Gervais: 'People are waiting for me to fail'

    As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
    Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

    Mad Men returns for a final fling

    The suits are still sharp, but Don Draper has lost his edge
    Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

    Google finds a lift into space will never get off the ground

    Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit