JO Hambro UK Equity Income Fund

Flanders and Swan, The Two Ronnies, Ant and Dec. Readers of hopefully most ages will recognise one of these successful double acts. But fund managers can work in partnership too, and Clive Beagles and James Lowen, the managers of the JO Hambro UK Equity Income Fund are a good example.

Unloved companies

The two managers have used the same approach to running the fund since it started in 2004. They look to mainly buy shares in companies that are a bit unloved by fellow investors. For example, an energy company may be unloved because the oil price is at a low level, or a housebuilding company because other investors think it might have too much debt. But importantly, the managers think that things could change to the benefit of the company.

This might be things the company can do itself, such as cut costs, or repay debt. It might also be something more linked to economics – such as a rise in the price of oil or copper. As an example, one of the fund’s recent holdings is furniture retailer DFS, in the belief that UK consumers are continuing to catch up with replacing their tired lounge furniture, following two years of covid-lockdown induced interruptions to spending.

Growing dividends

The companies Clive and James invest in are normally paying a dividend that is both higher than the UK market as a whole and also growing faster. If those companies are successful, and their prices rise, the dividend yield will fall towards the same level as that of the average company in the market. At this point, the shares are sold.

The managers also take the income needs of their fund’s investors very seriously. In most years, the fund is able to increase the amount of income it pays out to its investors. Whilst it wasn’t able to do so in 2020, due to the sheer number and magnitude of dividend cuts in the UK market, we have since seen the fund’s distribution rise again, albeit from a lower level. It is worth reminding ourselves that there is no guarantee dividends will rise, and 2020 has shown that the level of income can fall as well as rise.

Responsibility

It’s a simple process to describe, but of course harder to achieve, over and over again. In recent times the duo has increased their focus on Environmental, Social and Governance matters within the companies they own. As they run a big fund, they own large stakes in a lot of companies. This is a responsibility they take very seriously – and have sold businesses that they think are not making enough effort to improve how they work.

Successful double act

But working as a team is arguably the fund’s most interesting feature. Whilst colleagues and friends, both are competitive individuals. They have their own personal money invested in the fund they manage alongside their clients. They tell each other if they think they are wrong, and do not fall out about it. And most importantly, both are fully accountable for every decision made within it. Like all double acts, when successful, the whole is greater than the sum of the individual parts.

In addition to the JO Hambro UK Equity Income Fund, there are several more funds on the Barclays Funds List which invest in the UK market, two of which have a similar focus on income. Find out more information on these funds.

Correct at the time of publishing.

To diversify your investment, you may like to consider our own Barclays Ready-made Investments (RMI). The RMI are just one example of a range of diversified funds which allow you to select the level of risk you are most comfortable with. These multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified one-stop solution for investors. Ready-made Investments are not the only funds that we offer and they won’t be appropriate for everyone.

Past performance of the fund and its manager are not a reliable indicator of their future performance.

We don’t offer personal investment advice so if you’re unsure you should seek that independently.

Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.

These are our current opinions but the future, as ever, is uncertain and outcomes may differ.

Read the Assessment of Value report [PDF, 683KB] for funds run by Barclays.