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.

Global equity and bond markets rallied from their oversold levels in July, delivering their strongest set of monthly returns so far in 2022. Developed markets, as measured by the MSCI World NR Index, returned* 8%. US markets led regionally, with the S&P adding 9% and the NASDAQ registering double-digit returns of 12.6%.

The latest economic data releases for the second quarter evidenced a weakening global picture. The IMF downgraded global growth forecasts to 3.2% and 2.9% in 2022 and 2023 respectively, citing that downside risks from soaring inflation, the war in Ukraine and a slowdown in China had materialised. Global PMI data continued to contract to 2-year lows. The UK was no exception, with the CIPS UK Manufacturing Purchasing Managers’ Index declining to 52.1 in July. UK consumer confidence remains at record lows.

Whilst the Fed continued its hiking cycle, raising the Fed Funds Rate an anticipated 75bps to 2.25%, a narrative of peak inflation began to emerge on a change in tone and language from Fed speakers. Commodities weakened, inflation break-evens declined and bond markets moved to price a potential dovish pivot. The yield on US 10-year treasuries retreated to levels of 2.65%, having peaked at 3.47% on 14th June.

In the UK, CPI inflation rose to 9.4% in June, above consensus forecasts and the highest level recorded since 1982. More encouraging, however, was that core inflation (that excluding energy and food prices) has been in decline for the last two monthly readings.  Bond yields on 10-year gilts retreated to 1.86%, having peaked at 2.65% on 21st June.

Long duration and growth assets benefitting from the retreat in bond yields outperformed during the month, whilst the value rotation reversed. From a style factor** perspective, growth and quality were areas of relative strength. All major style factors**, with exception of dividend yield, managed to generate positive absolute returns* in July. 

Within this context, the FTSE All Share returned +4.4% for the month. In a reversal of the year-to-date trends of ‘flight to safety’, commodities weakness and growth outperformance, the FTSE 250 outperformed the FTSE 100 by +4.6%. Sector performance for the FTSE All Share was led by cyclicals; industrials, technology and consumer discretionary were areas of relative strength. The defensive- and commodity-related sectors of telecoms, healthcare, energy and basic materials delivered a weak performance for the month.

The UK Dynamic fund delivered an in-line performance versus benchmark in July. Asset allocation was a positive for the month, with an overweight position to industrials and underweight to healthcare delivering 40bps and 24bps performance respectively.

Stock selection in the month negatively offset positive allocation, primarily within financials.

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.  

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.

SFDR requirements have been applied to the offshore Fund which has been established for this strategy. The onshore Fund follows the same investment strategy but is not required to comply with the full requirements of SFDR. 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.