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.

Global equities gained materially in Q3, with Asian and US stock markets in the ascendancy, easily outpacing European and UK equities. Many European countries, such as Spain, are unfortunately experiencing a sizeable second wave of Covid-19 cases, which bodes poorly for the recovery in these economies. The UK market has been a constant laggard this year as it struggles with an ugly combination of Brexit concerns and the UK Government’s disjointed handling of the coronavirus crisis. 

Government bond yields were little changed over Q3, while corporate bonds enjoyed a positive quarter. 

Momentum and flows continue to dominate markets and it is important for investors to stay grounded as these flows can reverse sharply and quickly. Indeed, US growth stocks, which have benefited from the shift online caused by Covid-19 this year, found themselves under pressure in early September after a stellar August for technology names. 

Our fixed income holdings generated the bulk of the performance gains in September, with our US corporate bond holdings being the biggest contributor to the portfolio’s overall positive return. Our sovereign debt holdings also made a handy contribution to fund performance. 

The key shift in the portfolio was an increase in the allocation to high yield as credit spreads widened in the second half of September. Here we have focused on what we call cushion paper, which is an alias for bonds that will likely be called in the next couple of years.  Our allocation to high yield is still quite low, though, at 15% ex-preferred. We added modestly to financial, real estate and telecom preferred shares as well. 

We also recently added to beverage companies, which should continue to recover over the next 12-18 months, once vaccines become widely available. We try to balance such recovery stocks with stable growers and defensives.  We trimmed technology investments by roughly 10% as valuations improved.  

With traditional bonds yields low, the environment remains challenging for income investors. 
We advise income investors to remember the lessons of the Taper Tantrum of 2013, when bond yields rose sharply and traditional fixed income suffered losses. Value-oriented equities and preferred shares can help diversify traditional bonds. 

We continue to be excited about the theme of “green value (and income)”, including businesses related to the EU’s efforts to decarbonise the energy supply chain. We have meaningful exposure to industrial gas companies that are likely to be leaders in sourcing and distributing hydrogen. 

Beyond that, we have substantial investments in the utility complex. Here we see significant potential for transformative projects to add renewable energy to power grids. We are also drawn to certain cyclical industries that should continue to benefit as the global economy pursues an uneven and frustrating recovery, but a recovery nonetheless.

Our portfolio positioning continues to be balanced across defensives, cyclicals, technology and recovery investments.

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.