1. Introduction
J O Hambro Capital Management (“JOHCM”) is a performance-led active investment management company, offering its institutional and wholesale client base differentiated regional equity, global equity and multi-asset strategies.
JOHCM's fund managers have complete investment freedom within their mandates, subject to regulatory and our internally-agreed investment restrictions. There is deliberately no ‘house’ view on economies, markets, sectors or stocks. This leads to a diversity of views and approaches across its investment teams.
However, all of our fund managers appreciate the importance of stewardship practices, including engagement and voting. Their actions and decisions as shareholders can affect practices in the entities in which we invest, in turn affecting the environment, our stakeholders, and the community. We understand that we have both a duty and an interest in managing this influence and with that in mind have set out the JOHCM approach to stewardship below. JOHCM’s intention is to remain a signatory of the Financial Reporting Council’s Stewardship Code (the “Code”).
2. Approach to Engagement
Our success as an asset manager has been founded upon experienced fund managers with proven investment pedigrees and these carry weight when engaging with companies, improving our ability to effect change. Accordingly, the principles of the Code are integrated into the investment processes of the individual investment teams, rather than being devolved to a separate team. Each fund team conducts its own analysis and engagements, which ensures corporates receive advice grounded in the real world whilst clients gain deep, hands-on insights.
All of JOHCM’s fund managers recognise the value of engagement, and JOHCM sees engagement effectiveness as predicated on investment teams devising their own engagement strategies, styles and engagement topics; each aligns with the team’s purpose and value proposition to clients.
JOHCM’s fund managers aim to understand industry dynamics and structural changes as well as any company-specific issues for each of the companies in which they invest. They then focus on governance (for example, capital allocation and the remuneration structures which drive those decisions), social aspects (such as encouraging companies to work with all their stakeholders and improve corporate culture) and environmental factors (for example, exposure to risks relating to climate change) to support value protection and creation in that company over the long-term. In other words, the fund managers consider environment, social and governance (“ESG”) factors.
Engaging with investee companies is a natural extension of JOHCM’s active approach to investment management. Where appropriate, the fund managers undertake engagement with investee companies and issuers, focusing on where areas of concern have been identified or where a fund manager’s shareholding affords them greater influence. JOHCM’s investment teams approach engagement in a manner that is tailored to their influence, asset class, geography and client base.
When management teams fail to make the changes requested by a fund manager, the issue will be escalated either through changes in capital allocated to the holding or through proxy voting. All proxy voting is conducted directly by the fund managers and linked to the investment purpose of the fund.
3. Monitoring of Engagements with Investee Companies
JOHCM’s Head of Investments, Risk and Performance teams provide comprehensive oversight of the investment teams and their strategies. For each team, on a quarterly basis, there is a formal review that incorporates an analysis of the performance, decision-making, risk profile, fund liquidity, compliance and a review of key ESG metrics. A review of the investment team’s engagement forms part of this review.
Each team of JOHCM fund managers has several ESG tools available on which they can draw to carry out their analyses, but it is our belief that ESG analysis is not something separate from the investment process, and therefore these tools do not replace fundamental and integrated analysis. This analysis informs engagement priorities and insights from engagement are used to further enhance analysis.
All engagement across the firm is recorded in an engagement tool. This tool enables fund managers to record engagements, the topics discussed and relevant outcomes. Fund managers may also use the tool to record engagement plans and objectives, and enable progress to be checked against milestones.
4. Stakeholder Involvement and Cooperation with other Shareholders
Subject to applicable market conduct rules, JOHCM fund managers occasionally act with other investors where they believe such collaboration will increase the chances of bringing about change. Equally, they may, from time to time, engage with other stakeholders, such as regulators or industry bodies, when they believe that broader collaboration on an issue may have a meaningful impact.
5. Voting
JOHCM has implemented robust written policies and procedures designed to ensure that, when voting proxies in respect of the securities that it manages for its clients, it:
- does so in the best interest of its clients, addressing any conflicts that may arise between its interests and those of its clients;
- discloses to clients how they may obtain information from the firm about how the firm voted with respect to their securities; and
- describes to clients its proxy voting policies and procedures and, upon request, furnishes further details of these policies and procedures to clients.
JOHCM use Institutional Shareholder Services Inc. (ISS) as the sole proxy voting and research service provider. This service provides independent research on proposals, granular reporting on voting and automates a number of processes. A voting disclosure website has been developed in partnership with ISS, which enables clients to access full and detailed metrics on our voting on a fund-by-fund basis three months after the event.
As with any significant provider to JOHCM, a due diligence review of that provider is periodically performed and updated in line with our vendor management framework. The degree and frequency of the due diligence will be commensurate with the importance of the relationship to JOHCM’s operations and the materiality of the risk. Investment teams have full discretion in making their voting decision based on their own analysis, their engagement with the company and/or any available third-party research. Where the investment teams agree with the proposals, and they are in investors’ best interests, they will vote in favour of them.
When proposals do not reflect the best interests of shareholders, or wider society, the investment teams may choose to escalate these concerns by engaging with the senior independent director or company chairman. Our investment teams may also engage in discussions with other investors where appropriate and in compliance with market conduct rules.
Should a conflict of interest arise between JOHCM's interests and those of a client, JOHCM will arrange a discussion with such client to review the proxy voting materials and the conflict and will obtain the client's consent before voting. If JOHCM is not able to obtain the client's consent, JOHCM will take reasonable steps to ensure, and must be able to demonstrate, that those steps resulted in a decision to vote the proxies in the best interests of the client.
JOHCM’s voting records are held on ISS’s secure system.
JOHCM is happy to discuss its voting activity or discourse with company management as appropriate, should clients or potential clients have a particular interest.
In analysing the votes cast by our investment teams and in reporting these to our clients, JOHCM believes the focus should be on ‘significant votes’ as required by the Shareholders Rights Directive under UK law. Whilst the Directive does not define ‘significant votes,’ JOHCM defines these as:
- Votes relating to any resolution proposed by shareholders; OR
- Withheld votes; OR
- Abstained votes; OR
- Any votes where either ISS or the investment team has recommended voting AGAINST management.
In addition to the above, investment teams may also denote any votes they perceive as material as significant.
6. Conflicts of Interest
JOHCM’s approach to conflicts management consists of the following stages, set out in the firm’s Conflicts of Interest Policy:
- Identification of conflicts of interest
- Recording of conflicts of interest in the JOHCM Conflicts Register
- Implementing appropriate procedures and measures to prevent or manage conflicts of interest which have been identified
- Monitoring the effectiveness of JOHCM’s conflicts management arrangements, including the Conflicts Policy itself
- Provision of information to clients, including disclosure of conflicts of interest where required, provided that disclosure may only be used as a last resort where the arrangements established by JOHCM to prevent or manage conflicts are not sufficient to ensure, with reasonable confidence, that risks of damage to client interests will be prevented
- Reporting to senior management in relation to conflicts of interest.
7. Reporting
A report of JOHCM’s activities under this Policy is published annually to provide an overview of JOHCM’s stewardship activities and incorporates our annual proxy voting record. This is available from JOHCM’s website or from our Client Services team. Equally, we are happy to engage directly with our investors and clients to explain our approach to any aspect of this policy, as effective stewardship ultimately helps drive the investment returns they seek.
8. Review
This Policy has been adopted by J O Hambro Capital Management Limited and JOHCM Funds (UK) Limited. They will review this Policy at least annually.
