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.

When rates are low (and probably going up) and spreads are about as skinny as they have ever been, where does a credit investor go to make returns?  Returns driven solely by holding a credit instrument to maturity are likely to lack luster if interest rates do rise – that’s why we have recommended keeping durations short.  Fortunately, we have a playbook for finding excess returns in a low yield environment: we look for value-driving events. Over the years we have accumulated a few areas for hunting. Here we describe a few of them:

1. Realisation of Organic Credit Improvement - This is the most common way credit investors look to outperform.  Find a company whose credit metrics are improving, either because cash flow is growing faster than the debt, debt is getting paid down, or (most commonly) because they are about to get upgraded by the ratings agencies.  The search for yield in 2021 by many market participants has focused on trying to find those “rising stars” which are likely to get upgraded from high yield to investment grade. The resulting technical demand for those bonds by managers limited to investment grade issuers is often enough to move bond prices substantially. 
    
2. Early Debt Redemption – Many high yield bonds are callable before maturity. Typically, there is a schedule of fixed premiums the company must pay starting with the first call date a few years after the issue date (usually with descending premium every year thereafter).  However, before this schedule kicks in, the company is able to prepay the bonds at a price that equates to a fixed spread (often 30-50bps depending on the specific contract) over the relevant treasury security to the earliest call date.  This price can be expensive and a company is usually incentivized to call the bond early only if they can issue new debt to refinance the old debt at a substantial interest savings that is enough to outweigh the large penalty.  Given that high yield coupons are near all-time lows, this math works on early redemption more commonly now than in the past.  We have assembled an allocation of high coupon bonds with relatively near-term call dates where it is likely in the company’s interest to pay the extra “make-whole” premium by calling the bonds early.  
    
3. Convertible bonds – a strong economy is likely to drive rates higher, but it is also likely to drive stock prices higher.  We are always searching for convertible bonds with attractive yields issued by strong credits where the stock is significantly (though not impossibly) out of the money.  If we can find one of these where we think the equity is mispriced, even better.  While this type of security is always an important hunting ground for us, it is especially so during market environments like we have today.
    
4. M&A – The world of event-driven investing is permeated with managers attempting to identify companies who may unlock strategic value through corporate actions: spin-offs, mergers, and acquisitions are just a few of the most common transactions. Often there are significant opportunities to capitalize on these same events in the credit market, though many event-driven investors are more focused on the equity side of the ledger. Our team has substantial experience in the event-driven space and we are constantly in search of good credits that have not priced in the optionality of any such event.

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.
 

Amongst other characteristics, the Fund promotes environmental and social characteristics and invests in companies that apply good corporate governance.  JOHCM Funds (Ireland) Limited, the Fund’s manager, has therefore categorised the Fund as meeting the provisions set out in Article 8 of EU Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (“SFDR”).  

In addition to investing in issuers which meet the Fund’s financial criteria, J O Hambro Capital Management Limited (“Investment Manager”) seeks investment opportunities in durable businesses that it considers to be well-adapted to the regulatory and social landscape of the future. In the Investment Manager’s view, such businesses are those which do not undermine, if not advance, the achievement of the UN’s Sustainable Development Goals. 

The Fund will also seek to help companies improve on Environmental, Social and Governance (“ESG”) issues and encourage their continuous improvement by engaging in dialogue with them on a regular basis and highlighting specific areas of improvement which will be monitored over time. The team believes this approach will be additive to the fund’s financial objectives of regular income generation and long-term capital growth. 

The Fund is climate aware and seeks to reduce the Fund’s exposure to sectors causing adverse environmental impacts. 

In order to achieve such characteristics within the Fund, it applies exclusions to the selection of underlying assets as part of its investment decision-making process. The issuer of a security is considered “non-sustainable” if it does not meet one of these ESG key performance indicators, including non-compliance with the UN Global Compact. 

The Investment Manager excludes companies which derive 10% or more of their revenue from pornography, manufacture of controversial weapons (such as landmines and cluster munitions) or tobacco production, and companies with majority of revenues from oil sands production. 

Additionally, the Investment Manager relies on ESG scores and its own proprietary dashboard to assess and monitor its investments and seeks to exclude the businesses that it believes to be in the lowest quintile of ESG related risk factors across the fund’s global, all-cap investment universe (a “best-in-universe” approach). This criterion serves as a first filter. The Investment Manager then uses its own internal assessments as well as a third-party provider data in its ESG assessment process which results in a numerical score assigned to each issuer. The ESG scoring criterion will be applied to at least 90% of the issuers in which the Fund is invested. The Investment Manager then further reduces the universe by taking non-financial criteria into consideration before performing a financial analysis and further ESG-related analysis in an integrated fashion, leading to the construction and management of the portfolio.    These selection criteria may not be disapplied or overridden by the Investment Manager.  In order to measure and monitor the environmental characteristics of the Fund, the Investment Manager incorporates climate-related ESG risks into valuation and construction. The Investment Manager then monitors the carbon footprint and other climate-related data of the portfolio and keeps track of current high carbon emitters and whether they have committed to align with the 2015 Paris Agreement. 

For the social characteristics of the Fund, the Investment Manager will review whether investee companies have implemented appropriate policies and structures to support sustainable business practices in relation to their employees, customers and supply chain.   

Investee companies must follow good governance practices. This requires investee companies to adhere to minimum standards in various areas including sound management structures, employee relations, remuneration of staff and tax compliance. The Investment Manager is a signatory to the UK Stewardship Code 2012, is requesting to be a signatory to the UK Stewardship Code 2020 (together the “Code”) and is a signatory to the UN Principles for Responsible Investment (the “UNPRI”). As a signatory to the Code and the UNPRI, the good governance practices of investee companies are assessed by the Investment Manager prior to making an investment and periodically thereafter. 

A description of the extent to which environmental and social characteristics are met will be available as part of the annual report which will be published on this website once available. The Fund’s most recent annual report does not include any information pursuant to SFDR.