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.

In the context of the UK’s very recent political history there is no denying it is quite a shift to be talking about clarity. But after the decisive majority delivered in the early July elections, and given the ongoing political polarisation in other countries, it is not such a bold statement after all. After having its political midlife crisis early and delivering Brexit as a byproduct, the UK has retreated to the safe refuge of the centre at precisely the same time others are splintering in all directions. France has had to pull out all the stops to suppress the far right, while Germany has a myriad of structural problems. In contrast, Latin America has gone completely the other way, embracing a noticeably hard left doctrine at the same time as Asia, which has the precarious and highly fluid Sino-US relationship to navigate.  Even the US has a leadership crisis of its own, faced with an invidious choice between a freewheeling convicted felon or an incumbent demonstrating a precipitous decline in mental acuity. Set against all this, the UK really does look like a haven of tranquillity, and the JOHCM UK Dynamic strategy should be well-placed to benefit.

The Fund underperformed over the month, with some modest mix effects and some small stock specific negatives being the main factors.

GSK surrendered gains from earlier in the year.  Our view has been that the Zantac litigation and associated liabilities were already more than discounted in the price, masking an improving R&D productivity story and a broadening pipeline of attractive therapeutic assets. Given the Delaware court reversal in the key Daubert case on this issue and the renewed uncertainty this has caused, it is clear that, at least in the short term, this view has proven to be misplaced. Despite strong Q1 results lending clear credence to the core fundamental story, and whilst an appeal has already begun and previous precedents lean heavily in favour of the equity at this juncture, we are not naïve enough to believe recovery can happen in the absence of this being resolved. The shares are clearly very cheap, and the underlying progress is tangible, but we will manage the position size proactively in this period.

WPP underperformed as the market continued to fret over a revival of organic growth and fears of AI-induced fee pressure in the industry. The company has materially lagged behind peers despite demonstrating an elevated rate of innovation at its recent technology showcase and possessing hidden optionality for value release with its Kantar and PR assets. 

On the positive side, NCC performed well and continued on its path to redemption. The business is being reinvigorated by a strong new management team that is returning it to its core competencies, thereby placing it firmly in UK Dynamic territory. It has a skill set that is well equipped for the modern world, in this case, being the world’s leading independent cyber security consultancy. As well as a robust trading update, a well-received mini capital markets day on its Escode and managed security propositions have showcased its enviable armoury of offerings to improve corporate resilience and defences in a world of ever escalating threats. AI is only going to push that in one direction; whether we like it or not companies need to be prepared and NCC is increasingly becoming their partner of choice.
 
Meanwhile further good share price momentum continued at BT and 3i following strong cashflow projections and operating momentum respectively. Both remain significant conviction longs in the portfolio with the former in particular still looking exceptionally cheap and at the very early stages of its revitalisation journey.