The Fund aims to achieve long-term capital growth by investing in UK listed companies across the broad market cap range.

The volatility in equity markets, driven by a powerful confluence of cyclical and structural factors, continues in relentless fashion. On the cyclical side, long overdue changes to the pricing and availability of capital are fundamentally shifting risk appetite. As inflationary pressures accelerate and stagflation looms, the 1970s playbook continues to be dusted down from long-forgotten corners of the investment library. Underneath all this, powerful structural influences are also at play. Covid has already wrought significant change across numerous facets of society, including re-setting both domestic and corporate priorities, and this is bringing some powerful and interesting new areas of growth. Meanwhile, the influence of the Ukraine conflict on the geopolitical landscape has already been profound, pushing all elements of security up the agenda, including cyber, food and supply chains as well as the more obvious impact on defence spending itself. Finally, back here in the UK, noisy and toxic political headlines are heavily overshadowing what is actually an increasingly clear domestic agenda of infrastructure and renewables investment, energy security and regulatory rollback.

Taking all of the above in combination, there are a lot of moving parts. The trick from a portfolio perspective is to balance the key and material risks that are out there with some of the glaring valuation anomalies that are unfolding. Paradoxically, many of these reside in some of the more attractive opportunities structurally. Multiple compression and balance sheet stresses remain the biggest impeder of equity value and one which, with our highly disciplined process, we strive strongly to avoid. In brutal and messy markets, the unexpected will emerge, but so does irrationality and with it, some extraordinary mispricing. We have been taking advantage where we can, and so have company directors, with individual equity purchases of the portfolio companies now passing 50 for the year to date.

In the context of the conditions, the fund’s performance was pleasingly resilient. With the commodity-rich FTSE 100 continuing to leave the small and mid-cap indices, especially AIM, in its wake, it is no easy task for a stock-picking fund to generate alpha. Although our tech book has strikingly different characteristics to the average (sporting a 5% free cash flow yield for a start) it can still be pushed around by the broader sell off and we saw that over the month with Accesso, Gresham and Molten underperforming slightly despite all continuing to make excellent operational progress. Meanwhile, Igas temporarily left the commodity party, hit by Chancellor Rishi Sunak’s hastily introduced windfall tax which particularly impacts at the smaller end. Nevertheless, and clearly demonstrating some of the erroneous pricing we have been talking about, it now trades back below its usable tax losses, never mind ascribing any value to its highly cash-generative production portfolio, exciting geothermal opportunity, its other renewables agreements and potentially massive shale optionality.

Elsewhere, we saw excellent results from core positions NCC and Euromoney. The former, as a global independent leader in cyber security consulting, understandably sees a rich pool of opportunity ahead and with an impressive, broad based client list and unique skillset it has significant strategic value too. The shares responded well but trading on a near 8% free cash flow yield we believe it is wrong by a quantum and is a great example of the ‘misfortune to be quoted in the UK’ discount that currently prevails. Meanwhile, the fruits of Euromoney’s proactive investment programme are now becoming clear, witnessed through its accelerating top line, high quality recurring subscriber growth and exciting new product introductions. Market misperception of the growth potential of the asset is just starting to correct itself and we foresee a significant re-rating ahead.

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. All performance figures illustrate performance from the first full day that the Fund held investments. During the period 6 November 2001 to 7 May 2003 the performance record is based on the pre-existing share class that had a higher management fee.

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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 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”).  

J O Hambro Capital Management Limited (“Investment Manager”) seeks to invest only in companies that meet minimum sustainability practices. The Investment Manager refers to the ten principles of the UN Global Compact, which promote sustainable and responsible corporate development in order to make globalisation more socially and ecologically focused. They fall into the categories of the protection of human rights, maintenance of appropriate labour standards, promoting environmental responsibility and the prevention of corruption.   

In order to achieve the above, the Fund excludes investment in those companies it considers “non-sustainable”. The issuer of a security is considered “non-sustainable” if it is “non-compliant” with the UN Global Compact. The selection criteria may not be disapplied or overridden by the Investment Manager. We utilise the UN Global Compact assessment of our third-party provider, Sustainalytics. 

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 characteristics of the Fund, the Investment Manager will review the carbon footprint of the portfolio and environmental data published by its investee companies.  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.  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. 

Although the Fund may invest in economic activities that contribute to an environmental objective within the meaning of the EU’s Sustainable Finance Disclosure Regulation (SFDR), the Investment Manager is not currently in a position to assess the proportion, as a percentage of the Fund’s portfolio, of investments in environmentally sustainable activities which are aligned to the EU’s Taxonomy Regulation (TR) (Regulation (EU) 2020/852) and amending Regulation (EU) 2019/2088.

This is due to a lack of reliable, timely and verifiable data for the Investment Manager to make a full and accurate assessment of the investments of the Fund against the TR’s Technical Screening Criteria in respect of climate change mitigation and climate change adaptation. It is also important to note that given the geographical focus of the Fund’s strategy, companies within the investment universe might not be under any obligation to provide the data required under EU legislation.

As a result, the Investment Manager is unable to determine whether the underlying investments in the Fund contribute to climate change mitigation and/or climate change adaptation, or whether the Fund has investments in economic activities that qualify as environmentally sustainable pursuant to the TR. As such, it has been determined that, 0% of the Fund’s investments are in economic activities that qualify as environmentally sustainable under the TR.

The Investment Manager is keeping this situation under review and will revisit the TR disclosure requirements once sufficient data is available.

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. JOHCM has met the expected standard of reporting under the UK Stewardship Code in 2021 and has been approved as a signatory. 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.