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.

Market Overview

• Global equity markets continued to push higher in March, driven by a strong earnings season and continued evidence that macro indicators are turning more positive. Flash PMIs showed expansion continues in the US economy and that economic growth is now broadening to include the UK, whilst there are also signs of a stabilisation in the Eurozone. Correspondingly, the FTSE-All share increased 4.8% over the period, outstripping the S&P 500’s monthly move, and closing less than 40p off last year’s all-time high.
• Central banks globally are signalling there will be downward pressure on interest rates. This is giving corporates increasing confidence, with their balance sheets now mostly repaired and cash holdings close to record highs.
• Proactive management teams are benefitting from the marked disconnect between valuations and fundamentals created by UK equities, which remain the most favoured underweight of global asset allocators. Buybacks are on the rise (see examples below) and so too are acquisitions: at the time of writing, there have been 12 transactions in the UK in the first quarter alone, with delivered premiums the highest since 2018. Corporate buyers have undertaken all of these. An encouraging backdrop for the Fund.

Performance highlights

• The fund returned 5.64% in March, outperforming the FTSE All Share. Performance was attributed almost entirely to stock selection as share prices responded to a strong earnings results season for much of the portfolio.
• Convatec (38bps) numbers were impressive. The bedrock ethos of investment-led product innovation is starting to gestate through the P&L, demonstrating that this turnaround is taking shape. Organic growth has accelerated in all the key divisions, and portfolio vitality (defined by the company as the percentage of contribution from new products) continues to improve. This is a long-cycle asset, so the impact of this should be enduring. However, the sharp re-rating in the share price has led the Fund to trim its position.
• ITV (29bps) results led to significant consensus upgrades as solid results from ITVX and Studios were compounded by the announcement of a transformational cost savings programme and the accretive effect of a £235m buyback using proceeds from the sale of their 50% stake in Britbox International to the BBC. This is a marked change in direction for the earnings profile of this company and evidences the deep restructuring management has undertaken: consensus now shows higher quality and double-digit earnings growth out to 2025, but the shares are still trading on a p/e of just 10x.   
•  A capital markets update on 3i Group’s (26bps) holding in the value retailer Action (c.65% of 3i’s net asset value) resulted in further upgrades to analyst forecasts as management raised guidance on EBITDA margins whilst demonstrating their confidence on the growth runway. This remains a high conviction holding for the portfolio. Still, the position has been reduced to allocate capital to a new position in Associated British Foods (9bps) – the owner of value-clothing retailer Primark – where we see a similar growth runway but at an implied 60% discount in EV/EBITDA terms plus an additional benefit of management change following the appointment of the first new CFO in 23 years.
• Barclays (24bps) announced they will return approximately 50% of their market capitalisation over the next three years in buybacks or distributions. Given the market is valuing their equity at 0.4X tangible book, despite making near double digit returns on equity, this is undeniably the best route to go down, and it has finally injected life into the moribund share price.
• The turnaround strategy at Aviva (25bps) continued to deliver. Results demonstrated how building a leading proposition in workplace pensions and a strong presence in bulk annuities has created a multi-year growth runway. Combined with an improving backdrop in general insurance, this led medium-term guidance to be upgraded.

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.

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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 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.