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.

The Fund outperformed the index in May. The outperformance was solely attributable to stock selection with increasing signs the market is beginning to recognise the undervaluation of some of the Fund’s holdings aided, in part, by another period of strong earnings updates.

During the month we had news of a possible offer from Blackstone for St Modwen Properties (since confirmed) at a 21% premium to the previous day’s share price. This is the third property asset of the Fund to be bid for in seven months. In our view, the current offer price of 542p per share does not reflect the long-term optionality within the group’s businesses and land bank, built up over many years. Current average analyst forecasts of net tangible assets, adjusted for the recent trading statement and projected one year forward, suggest there is little to no premium being offered for these assets. 

QinetiQ shares regained their recent relative highs against the Fund’s benchmark following full year results that demonstrated strong momentum across a number of metrics including orders (the highest in a decade), revenues (+10% organic), profitability and cashflow. Despite being the fifth year of consecutive revenue growth, management guiding to mid-single digit organic growth, upgrading the addressable market by £5bn to £20bn and increasing balance sheet optionality, its shares remain at an unexpecting valuation of just c.13x (ex cash) FY22 PE.  

Convatec’s share price demonstrated how quickly things can change with a further 7% rise relative to the benchmark reflecting last month’s strong Q1 trading and continued industry commentary on the bounce back in elective surgeries globally. Likewise, Crest Nicholson’s share price continued to climb back towards pre-Covid-19 levels buoyed by further strong housing price data and news management had released £45m capital to accelerate existing growth plans following the disposal of land at Long Cross Garden Village.  

Interims from DMGT demonstrated a strong recovery in trading momentum within the Property and Consumer divisions setting earnings up to significantly beat analyst forecasts for the full year. Whilst management kept outlook guidance vague, three analysts subsequently upgraded FY21 earnings by 12-22%. Quite remarkably, the shares remained near unchanged over the month and continue to attribute a valuation of zero to Cazoo using a sum-of-the-parts methodology for the Group. 

ITV’s Q1 statement did not disappoint with guidance for Q2 TAR raised to +80% meaning minimal growth would be needed for H2 to reach analyst expectations despite being a period that will include the European Football Championships and a raft of new shows. 

Electrocomponents’ full year results saw analysts already making upgrades to FY22 and FY23 numbers on the back of evidence of strong trading momentum and, importantly, significant market share gains. The shares ended down 8% versus the benchmark as perceived growth stocks continued to de-rate globally. Full year results at 3i Group saw its NAV increase 18% year-on-year driven predominantly by improving operating performance across the whole portfolio. If markets remain buoyant there is increasingly scope for a number of disposals and significant levels of cash to be returned to shareholders.

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.

The Fund has the objective of generating a positive impact by investing in companies that have the potential to address the world’s major social and environmental challenges. 

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.