The objective of the JOHCM UK Dynamic Fund is to achieve long-term capital growth. The Fund will aim to achieve this objective mainly through investments primarily drawn from companies listed on either of the two primary markets of the London Stock Exchange: the main market and AIM. At least 75% of the Fund’s assets will, at all times, be invested in equity securities of companies domiciled or exercising a predominant part of their economic activity in the United Kingdom. On occasion the Fund may utilise this position to invest a proportion of its assets in equities listed on a recognised exchange outside the UK. Investment will be made primarily in equity securities which are readily marketable, but investments will also be made in equity securities of smaller companies which can be more lightly traded. The portfolio is likely to be fairly concentrated with the Fund typically holding equity interests in between 35 and 50 different companies.

This was the Fund’s best February since inception and, pleasingly, performance was driven almost entirely by stock selection with major news announcements from some of the Fund’s highest conviction positions. 

Aggreko announced it was in discussions with a private equity consortium over an 880p all cash offer (since confirmed) at a c. 39% premium to the share price at the time. We have written many times that the market fundamentally undervalues Aggreko and, whilst the offer is a welcome confirmation of this thesis, we view it as opportunistic. The price significantly undervalues what is the global leading franchise in temporary power solutions whose services are inextricably linked to achieving many of the targets within UN Sustainable Development Goal 7 (and more broadly the targets in Goal 13), deriving over 30% of revenues from North America in predominantly cyclical sectors and has seen its net debt position fall by £204m in the last year (equivalent to c15% of the market capitalised equity at the time of the bid) with net debt/EBITDA on track to reach the targeted 0.5x next year.   

There was also further hidden value being outed at DMGT, the Fund’s largest active position. Shares were up 26% at one point following the announced sale of the edtech business, Hobsons, at a price some 50-75% higher than analyst expectations plus the leaked news that Cazoo may IPO later this year, potentially via a US special purpose acquisition company, at a suggested value of £5-6bn. We have written before of how the share price undervalued DMGT’s c20% stake in Cazoo. Quite remarkably, if the £6bn valuation is achieved then this would mean the current share price implies a c4x FY19 EV/EBIT for the remainder of DMGT which includes the world’s leading insurance software company (RMS), two leading property data companies in the US and UK (Trepp and Landmark), the MailOnline, The Daily Mail, a number of leading events businesses and further stakes in venture and associate including 45% of Yopa the PurpleBricks rival.  

Although the effects of lockdowns led to further downgrades at Moneysupermarket, the market was impressed by the new CEO (ex-Just Eat CEO) who outlined a comprehensive growth strategy which built on the company’s existing differentiated capabilities and, importantly, required no increased investment. 

Full year results from Jupiter came ahead of analyst expectations with upgrades driven by performance fees and, importantly, management fees. There was also a return to special dividends reflecting the highly cash generative nature of this business. 

There were further upgrades at Anglo American’s full year results which, although benefitting significantly from rises in raw material spot prices, demonstrated the benefits of management’s continued focus on end markets with structural growth potential and disciplined capital allocation. 

Full year results from Barclays surprised some with their cautious outlook on the consumer business but good capital generation continued and, with an accompanying commitment to buybacks whilst being a big beneficiary of rising bond yields, shares were strong over the period.  

Performance data for the period 16 June 2008 to 23 October 2009 is for Ryder Court UK Dynamic Fund. From 23 October 2009 onwards, the Fund converted to the JOHCM UK Dynamic Fund.

Data shown net of fees, net income reinvested. Please note that all fund performance is shown against the FTSE All-Share TR 12pm adjusted. Performance of other share classes may vary and is available on request. Where shown, monthly returns table shows compounded discrete monthly performance. Performance of other share classes will vary and is available on request. During the period 16 June 2008 to 23 October 2009 the performance record is based on the pre-existing share class that had a higher management fee.

FTSE International Limited (“FTSE”) © FTSE 2017. The Industry Classification Benchmark (“ICB”) and all  rights in it are owned by and vest in FTSE and/or its licensors. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. Neither FTSE, nor its licensors accept any liability for any errors or omissions in the ICB. No further distribution of ICB is permitted without FTSE’s express written consent.

Past performance is no guarantee of future performance. The value of an investment and the income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. The annual management charge is deducted from the capital of the Fund. This will increase the income from the Fund but may constrain or erode potential for capital growth. The Funds investment include shares in small-cap companies and these tend to be traded less frequently and in lower volumes than larger companies making them potentially less liquid and more volatile.

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 looking for investments, J O Hambro Capital Management Limited (“Investment Manager”) seeks to avoid investing in companies which contribute to significant social and/or environmental harms, and thereby fail environmental, social and governance (“ESG”) key performance indicators.  The Investment Manager takes a holistic approach when considering a company’s sustainability characteristics.  In particular, the team looks for the sustainability “mindset” of the organisation, asking how is this business thinking sustainably and how does this lead to more sustainable, forward-looking business decisions.  In order to achieve the above, the Fund applies an exclusion to those companies it considers “non-sustainable”. The Fund will invest no more than 10% of the Fund in companies rated ‘Severe’ by Sustainalytics, and for any such Severe-rated company to be investable it must be categorised as ‘transitioning’ as defined by the Investment Manager’s framework.  The selection criteria may not be disapplied or overridden by the Investment Manager. 

The exclusion criteria referred to above will be applied prior to making any investment and the fund’s portfolio will be monitored for any investments which breach these exclusion criteria on a periodic basis. For this purpose, the Investment Manager will rely on data (and the ESG definitions aligned with that data) from a third-party provider, or such other source as the Investment Manager determines.  

In order to measure and monitor the environmental and social characteristics of the Fund, the Investment Manager will review relevant metrics including the carbon footprint of the portfolio, emissions reduction targets, diversity metrics, employee engagement, and whether investee companies have implemented appropriate policies and structures to support sustainable business practices.  The Investment Manager will also consider data provided by a third-party data provider, although this will not necessarily directly influence whether a company will be bought or sold by the Fund. 

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. 

The Fund uses the FTSE All Share Total Return Index for performance fee calculation purposes only and it is not, nor is it intended to be, aligned and/or consistent with the environmental and social characteristics promoted by the Fund.