The objective of the Fund is to offer regular income generation consistent with long termcapital growth. To achieve this objective the Fund will apply an investment process based on fundamental analysis (i.e. a method of evaluating the “intrinsic value” of a security by examining related economic, financial and other qualitative and quantitative factors).

The Fund seeks to achieve its investment objective by applying a bottom-up, long-term global value investing philosophy across a variety of asset classes as further detailed below. In a bottom-up approach, companies and securities are researched and chosen individually rather than on the industry in which that company operates or on the economy as a whole. The Fund will invest in a wide range of equity securities of companies located in multiple countries around the world with a focus on shares which offer an attractive dividend yield (generally two percent or higher). The Fund will invest in a wide range of fixed income instruments securities from markets in multiple countries around theworld such as high-yield instruments debt-securities (commonly referred to as ‘‘junk bonds’’), investment grade instruments debt securities and sovereign debt securities.

Our equity exposure increased somewhat during the fourth quarter and ended the year at just over 60 per cent. This was the result of market appreciation as well as some additional capital deployments into a few, carefully-selected defensive equities. 

With the possibility of rising rates, we are particularly focused on the balance between (i) longer duration, rate sensitive assets (across fixed income and equities) that could be impacted by rising rates and (ii) more cyclical, recovery-oriented investments that could protect and profit from inflation and higher yields and/or steeper yield curves.

Within corporate bonds, we continue to have a sizeable allocation to non-traditional bonds such as preferreds, converts, hybrids and subordinateds). This is where we see value, with credit pretty well bid. 

With many cyclical and recovery-oriented shares appreciating sharply, we took some profits in such areas as financial services, travel companies, foodservice, catering and office real estate. We also exited an investment in a communication services company which is being acquired. 

Sales were more than offset by purchases of utility, pharmaceutical and consumer staples / food companies which saw modest declines as investors bid up cyclicals. Pharmaceutical and staples investments offer attractive income and growth, while boasting pricing power to help offset potential inflation. 

Utility investments can benefit from the transition to greener energy. As fiscal stimulus aligns with decarbonisation efforts, well-positioned utilities can recapture – as growth – some of the headwinds they may face from stimulus pushing up rate. Indeed, a leading global green utility has become a top ten holding. 

We continue to feel that traditional fixed income is not particularly attractive. However, we were able to identify some more event-driven credit investments that we believe could have equity like returns. One example is a “busted” telecommunications company convertible bond (a “busted” convertible has a strike price well above the current share price, such that the buyer of the convertible pays very little for the embedded equity option). The instrument is well covered by balance sheet cash, and the optionality could have more value than market participants currently believe. 

The capital flows described above have led our equities to have a more defensive profile, counteracting somewhat the higher overall exposure in risk terms. 

Relative to traditional fixed income, we feel that defensive equities offer better income, total return and resilience to rising rates. However, this is not to say that rising rates couldn’t be a headwind here as well. This risk is balanced by our cyclical and deep value investments, which include financial services, materials and industrial businesses that should benefit from rising interest rates and inflation. 

JOHCM. NAV of Share Class A in GBP, net income reinvested, net of fees. The A GBP Class was launched on 30 April 2018. 

The Fund’s objective is to offer monthly income generation consistent with long-term capital growth. In order to make monthly distributions, all or part of fees and expenses may be charged to the capital of the Fund. By charging the fees and/or expenses to capital, capital may be eroded and income will be achieved by foregoing the potential for future capital growth. The annual management charge is charged to the capital of the Fund.

Past performance is no guarantee of future performance. The value of investments and the income from them may go down as well as up and you may not get back your original investment. The information contained herein including any expression of opinion is for information purposes only and is given on the understanding that it is not a recommendation.