The Fund aims to achieve long-term capital growth and to generate a dividend yield that is above that of the FTSE All-Share Index average. The Fund focuses predominantly on stocks within the FTSE 350 Index that generate a prospective yield above that of the FTSE All-Share Index average. The Fund's performance benchmark is the FTSE All-Share Total Return Index denominated in sterling.Please note that for capacity reasons the Fund is now 'soft-closed' to new direct investors.

Market dynamics were once again volatile in February. Although the index ended the month only modestly higher, within that there was a material shift in the market mix as a result of higher bond yields and higher commodity prices. 

The Fund strongly outperformed its benchmark in February with the commodity sectors up solidly. The oil sector, including BP, our largest holding, was up 5-7% relative to the Fund’s benchmark, the FTSE All-Share Total Return index (12pm adjusted), with our small cap stocks in this area performing very well (e.g. Savannah up 45%), whilst mining, which has been strong for much of the last six months, remained robust. Glencore and Anglo American were up c. 15% relative. The mining sector produced very robust results during the month with some dividends materially exceeding our forecasts. The sector remains very cheap, in our view, and is at the centre of two positive trends: the global economic recovery, led by China, which will spread as the vaccine is rolled out in 2021; and decarbonisation and the acceleration of the green agenda, which is metal intensive. 

We have very little in sectors directly affected by Covid-19, which have been volatile and in many instances will not recover their former profit levels due to structural challenges e.g. retail property owners. The two stocks we do own in this area, Easyjet (up 30% relative) and National Express (up 20% relative), performed well. We have now largely sold the latter. Easyjet should, in our view, be a ‘winner’ over the next decade with a materially lower cost base than before the pandemic and it is now operating in a market with much lower capacity due to competitor exits. 

Bank results were also strong with most, particularly the domestic names, beating forecasts. The rise in bond yields also helped this sector. Shareholder payouts, including both buybacks and dividends, were slightly better than expected. Barclays, for example, announced a payout of 5p per share versus our 3p estimate, but a significant proportion of the payout (4p) will come from buybacks, with management signalling that its stock remains too cheap. This mix means in aggregate the flow of dividends from our banks is slightly lower than our estimates (with buybacks higher). At a Fund level this is more than offset by the dividend beats in the mining sector, so our view on strong Fund dividend growth remain intact. 

UK domestic names performed well, helped by the rise in sterling and general optimism around the roadmap to re-opening the economy. Within this, small caps were particularly buoyant. Norcros, Galliford and Costain were all up more than 10% relative. ITV also performed well. Other notable moves include DS Smith, which rose following rumours of a bid from Mondi, and recent IPO and addition Conduit, which is benefiting from rising insurance prices. 

There were not many laggards across the month, although more defensive type stocks were weak. Both our food retail names were down 7% relative, with Hipgnosis and Vodafone also down in relative terms.

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.

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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. 

Amongst other characteristics, the Fund promotes environmental and social characteristics and invests in companies that apply good corporate governance.  JOHCM Funds (Ireland) Limited, the Fund’s manager has therefore categorised the Fund as meeting the provisions set out in Article 8 of EU Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (“SFDR”).  

J O Hambro Capital Management Limited (“Investment Manager”) seeks to invest only in companies that meet minimum sustainability practices and have a coherent and well-articulated approach to sustainability to remain relevant to their customers, investors and society in general. The Investment Manager recognises that companies which fail to do so will progressively struggle.   

In order to achieve the above, the Investment Manager uses ESG scores to assess and monitor its investments and seeks to exclude businesses that are rated as ‘CCC’ by MSCI ESG or are assessed as ‘non-compliant’ with the UN Global Compact.  When an investee company no longer complies with any of these standards, the Investment Manager will engage with that issuer for a period of up to 18 months to allow the company to implement the necessary change, otherwise the Fund will exit that position.  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 its third-party provider, ISS, or such other source as the Investment Manager determines.  We utilise the UN Global Compact assessment of another third-party provider, Sustainalytics. 

In order to measure and monitor the environmental characteristics of the Fund, the Investment Manager will review the carbon footprint of the portfolio, the trajectory of change of its investee companies’ ESG ratings and environmental data published by those companies.  For the social characteristics of the Fund, the Investment Manager will review whether investee companies have implemented appropriate policies and structures to support sustainable business practices.   

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, is requesting to be a signatory to the UK Stewardship Code 2020 (together the “Code”) and is a signatory to the UN Principles for Responsible Investment (the “UNPRI”). 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.