JOHCM Credit Income Fund (JOCIX)

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Fund Description

The JOHCM Credit Income Fund is managed by Giorgio Caputo, Senior Fund Manager and Head of Multi-Asset Value and Adam Gittes, Senior Fund Manager and Head of Credit. They are supported by the members of the New York-based Multi-Asset Value team.  The Fund seeks competitive current income through a flexible, global corporate credit allocation appropriate for risk-aware investors.

Investment Strategy

Fund managers Giorgio Caputo and Adam Gittes seek to build a portfolio that reflects their investment views across the fixed income markets that is consistent with the Fund's objective of preserving capital and delivering returns through a combination of income and modest capital appreciation. They seek to avoid the permanent impairment of capital while identifying investments in companies that produce resilient income streams. The Fund employs a conservative approach that prioritizes capital preservation without reaching for yield.

The Fund employs a highly analytical process that focuses on evaluating an investment's durability and capacity; financial position (particularly cash flow), stability of revenues and cost structure; and corporate and legal structure.

As market conditions change, the volatility and attractiveness of sectors, securities and strategies can change as well. To optimize the Fund's risk/return, the portfolio managers may dynamically adjust the mix of different asset class exposures.

 

Investment Objective

The investment objective of the JOHCM Credit Income Fund (the "Fund") is to preserve capital and deliver returns through a combination of income and modest capital appreciation.

The Fund invests, under normal circumstances, at least 80% of its net assets in fixed income securities across a wide range of maturities. The securities can include investment grade corporate debt, high yield securities, convertible bonds (including contingent convertible bonds), preferred stock, floating-rate debt, collateralized debt, municipal debt, foreign debt (including emerging markets), commercial paper, loans and loan participations. The Fund may also invest up to 10% of its net assets in dividend paying equities of companies of any size.

 

  • Giorgio Caputo

    Senior Fund Manager & Head of Multi-Asset Value

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  • Adam Gittes

    Senior Fund Manager & Head of Credit

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Other Multi-Asset Equity Funds

JOHCM Global Income Builder Fund (JOBIX)

The JOHCM Global Income Builder Fund is managed by JOHCM’s New York-based Multi-Asset Value team, which includes Senior Fund Managers Giorgio Caputo, Adam Gittes and Robert Hordon and Fund Manager Remy Gicquel.

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Fund details

Data as at 31 October 2022
Fund size $6.04mn
Strategy size $5.98mn (as at 31 December 2020)
Fund inception date 17 August 2020
Benchmark Bloomberg Barclays US Aggregate Index, ICE BofAML BB-B Global High Yield Constrained Index
Share classes
Institutional (Launch date) 17-August-2020
Advisor (Launch date) 17-August-2020
Investor (Launch date) 17-August-2020
Minimum investment
Institutional $1,000,000
Advisor $0
Investor $0
Fund codes
Fund Ticker Share Class Fund Number CUSIP
JOCIX Institutional 688 46653M740
JOCEX Advisor 488 46653M732
JOCMX Investor 588
Fees and Expenses
Fund Ticker Share Class Net Expense Ratio* Gross Expense Ratio*
JOCIX Institutional 0.59% 1.60%
JOCEX Advisor 0.69% 1.70%
JOCMX Investor 0.84% 1.85%

*Expense ratios as stated in the latest prospectus. JOHCM (USA) Inc. has contractually agreed to waive fees and reimburse expenses so that the Net Total Operating Expenses do not exceed the stated amounts until January 28, 2023.

Administration

Investment manager J O Hambro Capital Management Limited
Transfer agent and registrar Northern Trust
Custodian Northern Trust

Strategy Highlights

As at 30 September 2022

Market commentators sure do love a good acronym, and we have been introduced to a new one over the last few years – TINA. It stands for “There Is No Alternative” and is supposed to mean that interest rates near zero have made asset classes besides equity unattractive. While that was never strictly true, the search for returns, and, more broadly, the search for yield in a zero‑rate environment has created interesting incentives. Markets – always happy to innovate to attract capital – became flooded with new products: Infrastructure as an asset class, collectible baseball card funds, crypto‑currencies as just a few examples going progressively further out the risk continuum. While we can (and have) debated the merits of digital art, it seems safe to say that a combination of zero interest rates and surplus liquidity contributed to an environment where jpegs of monkeys sold for millions of dollars.

Well for those who liked TINA, we have good news! From the makers of TINA, there’s a new acronym, and its just as spiffy a name as the last. Get used to hearing a lot about TARA. TARA has already made its way into the business television zeitgeist, so it is probably here for a while as a contrast to TINA. TARA is supposed to stand for “There Are Reasonable Alternatives” or something close to that (the official acronym sanctioning body is still finalizing the language). Either way, the meaning is clear: investors no longer must buy equities (or baseball cards, or cryptocurrencies, or jpegs of monkeys) because there are other ways to earn returns now!

In the third quarter alone, the yield on the 2‑year Treasury has risen from just under 3% to nearly 4.3% at the end of September. Through the first nine months of the year, this same benchmark has widened by over 350 basis points! Prices have adjusted accordingly, but the process of getting there has been painful for all yield‑based instruments. Through the end of Q3, the Bloomberg Barclays U.S. Aggregate Bond Index is down over 14.6% while the ICE BAML BB‑B Global High Yield Constrained Index is down nearly 18.9%. To be sure, global yields have materially reset this year. Looking on the bright side, one can now earn nearly 4% guaranteed by the U.S. Government for the next 10 (or 30!) years. (The value of the currency you will receive in return is a discussion for another time.) While spread widening has been a feature of the year (ICE BAML HY spreads have moved from 330 at the start of the year to around 550 at the end of Q3), spreads were actually tighter at the end of September than they were at the beginning of July when high yield spreads hit their widest level of the year. We still expect spreads to widen further, but some opportunities in credit created by this year’s move lower are undeniably attractive now. Particularly in credits that have no need for capital as the riskier parts of the credit markets teeter back and forth between open and shut to new capital raising.

For the quarter, the fund lost 68 basis points as compared with a loss of 2.71% for the ICE BofA BB‑B Global High Yield Constrained Index and a loss of 4.75% for the Bloomberg Barclays U.S. Aggregate Bond Index. The portfolio positioning referenced earlier in the year remained a driver of the outperformance, namely:

  • Our shorter portfolio duration
  • The cash position we built early in the year in an attempt to avoid the oncoming avalanche and 
  • Positive events in several of our names during the period

The largest detractors for the quarter were our long-dated treasury securities as well as one of our few lower quality bonds (Advantage Solutions – which is a first lien position in a very durable business on the precipice of a cash flow inflection in 2023). The largest contributor on the positive side was an event  driven trade in Plantronics as the announced acquisition by HP closed during the quarter and the extra consent payment for the exchange offer was paid.

Our base case outlook is always changing with the best information we have at the time. We have been wrong on when peak inflation would be realized by the Federal Reserve, but have thankfully stayed conservatively positioned despite this error. We believe the following is the most likely path forward:

  • The United States will enter a recession sometime in the next 12 months driven there by the restrictive policy of the Federal Reserve. 
  • The Federal Reserve will not indicate a willingness to pivot until after we have entered the recession, for fear of missing early on taming inflation. 
  • Once the recession is widely apparent, the Federal Reserve will move to reduce the restrictive policy and rates will shift downward. 
  • Default rates will pick up during the recession as liquidity will continue to be hard to source for the most troubled companies, leading to wider spread​​​​​​​ levels in high yield, albeit balanced against a lower Treasury curve.

Sources for all data: JOHCM/Bloomberg (unless otherwise stated).

Total Return (%)

Data as at October 31, 2022
  1 Month Total Return 3 Month Total Return YTD Total Return 1 Year Total Return Cumulative Since Inception
Institutional Shares Net 1.46 -2.49 -8.95 -9.42 -4.69
Benchmark -1.30 -8.23 -15.72 -15.68 -11.43

Annualised Return (%)

Data as at September 30, 2022
  1 Year 2 Year 3 Year 4 Year 5 Year 10 Year Annualized Since Inception
Institutional Shares Net -10.76 -3.00 -2.90
Benchmark -19.47 -6.58 -6.52

Monthly returns (%)

Data as at 31 October 2022
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual

Expense Ratio (%)

Data as at February 28, 2022
Share Class Gross Expense* Net Expense*
Advisor 1.70% 0.69%
Institutional 1.60% 0.59%

Important Information

The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days at www.johcm.com or by calling 866-260-9549 or 312-557-5913.

Returns shown, unless otherwise indicated, are total returns, with dividends and income reinvested. Returns for periods of less than one year are not annualized. Fee waivers are in effect; if they had not been in effect performance would have been lower.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. Any Indicies mentioned are unmanaged statistical composites of stock market performance. Investing in an index is not possible.

Historical performance of the International Select Fund for Class II Shares prior to its inception is based on the performance of Class I Shares. The performance of Class II Shares has been adjusted to reflect differences in expenses.

*Expense ratios as stated in the latest prospectus. JOHCM (USA) Inc. has contractually agreed to waive fees and reimburse expenses so that the Net Total Operating Expenses do not exceed the stated amounts until January 28, 2023.

Top 10 holdings and active weights

Data as at 31 October 2022
Top 10 holdings
2020 Cash MandatoryéExchangeable Trust 2.05%
TripAdvisoré7.00% 15 Jul 2025 4.91%
TripAdvisoré7.00% 15 Jul 2025 4.91%
Austerlitz Acquisition 0.10%
Netflix Inc 6.375% 15 May 2029 4.39%
Netflix Inc 6.375% 15 May 2029 4.39%
Northern Star 0.03%
Wesco 7.25% 4.20%
Wesco 7.25% 4.20%
CC Neuberger 0.01%

Fund

As at noon Share class Currency CUSIP Number NAV Change Change % Previous
JOHCM International Select Fund 02/12/2022 Institutional USD 46653M849 21.05 -0.07 -0.33% 21.12
Investor USD 46653M823 21.03 -0.08 -0.38% 21.11
JOHCM Emerging Markets Opportunities Fund 02/12/2022 Advisor USD 46653M203 10.68 -0.01 -0.09% 10.69
Institutional USD 46653M104 10.71 -0.01 -0.09% 10.72
Investor USD 46653M302 10.68 -0.01 -0.09% 10.69
JOHCM Global Select Fund 02/12/2022 Advisor USD 46653M807 14.14 -0.01 -0.07% 14.15
Institutional USD 46653M708 14.19 -0.02 -0.14% 14.21
JOHCM Emerging Markets Small-Mid Cap Equity Fund 02/12/2022 Advisor USD 46653M500 11.41 0.04 0.35% 11.37
Institutional USD 46653M401 11.42 0.04 0.35% 11.38
JOHCM Global Income Builder Fund 02/12/2022 Advisor USD 46653M799 9.85 -0.02 -0.20% 9.87
Institutional USD 46653M815 9.85 -0.03 -0.30% 9.88
Investor USD 46653M781 9.84 -0.03 -0.30% 9.87
JOHCM International Opportunities Fund 02/12/2022 Institutional USD 46653M872 10.20 0.02 0.20% 10.18
JOHCM Credit Income Fund 02/12/2022 Institutional USD 46653M740 8.93 0.00 0.00% 8.93
Regnan Global Equity Impact Solutions 02/12/2022 Institutional USD 46653M716 7.44 -0.01 -0.13% 7.45
TSW Large Cap Value Fund 02/12/2022 Institutional USD 46653M641 14.74 0.04 0.27% 14.70
TSW High Yield Bond Fund 02/12/2022 Institutional USD 46653M658 8.67 0.01 0.12% 8.66

Important Information

The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund's current performance may be lower or higher than the performance data quoted. Investors may obtain performance information current to the most recent month-end, within 7 business days at www.johcm.com or by calling 866-260-9549 or 312-557-5913.

Returns shown, unless otherwise indicated, are total returns, with dividends and income reinvested. Returns for periods of less than one year are not annualized. Fee waivers are in effect; if they had not been in effect performance would have been lower.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. Any Indicies mentioned are unmanaged statistical composites of stock market performance. Investing in an index is not possible.

Historical performance of the International Select Fund for Class II Shares prior to its inception is based on the performance of Class I Shares. The performance of Class II Shares has been adjusted to reflect differences in expenses.

*Expense ratios as stated in the latest prospectus. JOHCM (USA) Inc. has contractually agreed to waive fees and reimburse expenses so that the Net Total Operating Expenses do not exceed the stated amounts until January 28, 2023.

10 Nov 2021

Global Value and Income Dispatch

Stewarding capital through regime transitions

27 Jul 2021

Global Value and Income Dispatch

Inflation Now; Deflation Later? And Aligning Capital with Labor

24 Jun 2021

Global Value and Income Dispatch

Responsible income: is it time to take your last puff?

08 Jun 2021

Global Value and Income Dispatch

Ten thoughts for the new inflationary regime 
 

11 May 2021

Global Value and Income Dispatch

Should Credit Investors Panic About Rates?

21 Apr 2021

Global Value and Income Dispatch

Don’t let rising rates erode your income assets!

15 Apr 2021

Global Value and Income Dispatch

Fishing in the right ponds: responding to shifts in market regime

02 Feb 2021

Global Value and Income Dispatch

Managing through rising rates with “2020 Hindsight”
 

02 Nov 2020

Global Value and Income Dispatch

Q3 review: The rise of tangible capital?
 

22 Jul 2020

Global Income and Value Dispatch

Q2 review: the global income challenge
 

07 Apr 2020

Global Value and Income Dispatch

Q1 review: In the midst of chaos, there is also opportunity

17 Mar 2020

Global Income and Value Dispatch

Why worried investors shouldn’t be like Alice in Wonderland

06 Mar 2020

Global Value and Income Dispatch

Falling knives, iron gloves and The Shawshank Redemption: thoughts on the coronavirus from the JOHCM Multi-Asset Value team. 

05 Feb 2020

Global Value & Income Dispatch

Q4 Review: What are you paying for today?

26 Nov 2019

Global Value & Income Dispatch

Don't pay too much attention to the default rate. It's rating migration that matters. 

04 Nov 2019

Global Value & Income Dispatch

Q3 Review: Bifurcation and what the averages don't tell you...

29 Oct 2019

Credit market review - Q3 2019

Lale Topcuoglu reviews developments in the credit markets over Q3 2019 

09 Aug 2019

Global Value and Income Dispatch

Quality traps, liquidity voids and central bank puts. 

10 May 2019

Global Value and Income Dispatch

What do Swiss cheese and high yield covenants have in common? A lot of holes!

25 Apr 2019

Global Value and Income Dispatch

Blink and you might miss it! – the bottom-up advantage

01 Feb 2019

Global Value and Income Dispatch

Strategies for the next market and on being greedy when others are fearful

23 Jan 2019

Global Value and Income Dispatch

Beware of the liquidity illusion in the quest for higher yields.

27 Nov 2018

Global Value and Income Dispatch

Should investors buy because prices are lower or sell because the economy may be slowing? Giorgio Caputo, JOHCM Global Income Builder Fund, provides his view.

13 Oct 2018

Global Value and Income Dispatch

An insight into the JOHCM Global Income Builder Fund - A fund for all seasons 

28 Aug 2018

Global Value and Income Dispatch

Looking for income? Three reasons to go global
 

29 Jul 2018

Global Value and Income Dispatch

Duration as a diversifier: Giorgio Caputo, Senior Fund Manager of the JOHCM Global Income Builder Fund, provides an update on portfolio positioning. 

01 May 2018

Global Value and Income Dispatch

It is our great pleasure to update you on JOHCM Global Income Builder Fund’s (JOBIX) first full quarter of operation.

No Data

Prospectus

An investor should consider the Fund’s investment objectives, risks, and charges and expenses carefully before investing or sending any money. This and other important information about the Funds can be found in the Fund’s(s) prospectus or summary prospectus which can be obtained at www.johcm.com or by calling 866-260-9549 or 312-557-5913. Please read the prospectus or summary prospectus carefully before investing. The JOHCM Funds are advised by J O Hambro Capital Management Limited and distributed through Foreside Financial Services, LLC, member FINRA. The JOHCM Funds are not FDIC-insured, may lose value, and have no bank guarantee.

Risks

Fixed income securities will increase or decrease in value based on changes in interest rates. If rates increase, the value of the Fund’s fixed income securities generally declines. If interest rates fall, the value of fixed income securities generally increase. Long-term fixed income securities or instruments will normally have more price volatility because of this risk than short term fixed income securities or instruments. Below investment grade fixed income securities, also known as “junk bonds,” are not investment grade and are generally considered speculative because they present a greater risk of loss than higher quality debt securities. Investors should note that investments in foreign securities involve additional risks due to currency fluctuations, economic and political conditions, and differences in financial reporting standards. Other risks may include and are not limited to liquidity, loan-related, currency, hedging, derivatives and credit risks.

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