The Fund aims to achieve long-term capital growth by investing in UK listed companies across the broad market cap range.

May was an exceptionally busy month from a fundamental perspective but also a very encouraging one. Performance was a modest positive, but that very much belies the true underlying progress of which space limitations only allow us to highlight a fraction of the activity. 

Our biggest detractor, First Derivatives, unveiled what we consider to be a very ambitious but absolutely correct accelerated investment programme. As a long-term holder and hopefully therefore with a strong and embedded understanding of this business, this is something we have long sought the company to undertake as it has truly world class technology in a really exciting market and one which is seeing a rapid pace of adoption (Gartner estimates market CAGR at ~30% pa). After a high calibre recruitment campaign and aligned with a robust balance sheet, the company has all the tools at its disposal to execute and if it can successfully do so, will deliver very material shareholder value. This is precisely the type of proactive initiative that would almost certainly have been handsomely rewarded by the US market, but a more conservative UK investor base has instead taken fright at the short-term P&L cost. We respectfully disagree with that view and have added significantly to our holding into the weakness.

Another holding to announce an ambitious investment plan, and again from a position of strength, was BT. In a post Covid-19 world, the need for fast, reliable and secure broadband is self-evident; we are in an era of sustainably higher traffic and the likely permanent adoption of hybrid working practices. BT is ideally placed to deliver on this demand, being the lowest cost, scale provider in a market with clear and attractive regulatory incentives and implicit political backing. Although the shares have had a strong few months it is still fundamentally undervalued, and a classic example of a stock priced for its history not its future. The CEO clearly agrees with yet another material share purchase taking his individual holding past £10m. 

Another area where demand has exploded post COVID with the change in working practices and associated network vulnerabilities is cyber security. We own the leading global independent consultancy in this space, NCC, who serve not only most of the Silicon valley giants but Nation states and routinely deals with the order of a staggering 10 billion threats per day. Reflecting this backdrop, the company delivered a top of the range trading statement and has capitalised on the opportunity set with a strategically attractive acquisition, further underpinning the quality of earnings, cashflow and cross sell potential. We participated in the fundraise which supported this deal and the stock remains a high conviction position. We took a similar stance in Gresham Computing which undertook a very neat deal of its own, adding scale and distribution in the US for its best in class Clareti platform, and achieving the twin objectives of opening up its largest potential addressable market and further building its high quality recurring revenue streams.

Finally, as foreshadowed, we received a preliminary approach for our respiratory and device specialist Vectura. The proposal, from Carlyle Group, was at a 32% premium to the prevailing price, a reasonable but certainly not knockout proposition. We believe the company is strategically valuable asset with very comprehensive IP and as such could easily attract further interest, most notably from trade buyers who can bring synergies to the table. As such, whilst we have taken some modest excess profit of the table, we will continue to run the core of the position and await the end outcome with considerable interest.

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. All performance figures illustrate performance from the first full day that the Fund held investments. During the period 6 November 2001 to 7 May 2003 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 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. The Investment Manager refers to the ten principles of the UN Global Compact, which promote sustainable and responsible corporate development in order to make globalisation more socially and ecologically focused. They fall into the categories of the protection of human rights, maintenance of appropriate labour standards, promoting environmental responsibility and the prevention of corruption.   

In order to achieve the above, the Fund excludes investment in those companies it considers “non-sustainable”. The issuer of a security is considered “non-sustainable” if it is “non-compliant” with the UN Global Compact. The selection criteria may not be disapplied or overridden by the Investment Manager. We utilise the UN Global Compact assessment of our third-party provider, Sustainalytics. 

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 characteristics of the Fund, the Investment Manager will review the carbon footprint of the portfolio and environmental data published by its investee 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.  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. 

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.