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JOHCM UK Equity Income Fund: Hunting Undervalued FTSE Treasures

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  Published in Stocks and Investing on Saturday, January 3rd 2026 at 18:28 GMT by This is Money

Hunting Value: A Look at the JOHCM UK Equity Income Fund – Finding Undervalued FTSE Treasures

The JOHCM UK Equity Income Fund has been quietly generating strong returns for investors over several years, distinguishing itself through a contrarian investment strategy focused on identifying undervalued companies within the FTSE 100 and FTSE 250. This is Money’s recent article highlights the fund's approach and performance, offering insights into its philosophy and potential appeal to income-seeking investors.

A Contrarian Approach Rooted in Value Investing

The fund is managed by Richard Williams and his team at JOHCM (Jameson Investment Opportunities), a firm known for its disciplined value investing style. Unlike many funds that chase growth stocks, the JOHCM UK Equity Income Fund actively seeks out companies trading below their intrinsic value – essentially, businesses whose share price doesn't accurately reflect their underlying worth. This "contrarian" approach means they often invest in sectors and companies overlooked or even disliked by other investors, believing these are ripe for a re-evaluation of market sentiment.

The fund’s process begins with rigorous fundamental analysis. Williams and his team meticulously examine company accounts, management teams, competitive landscapes, and future prospects. They aren't simply looking at current earnings; they're trying to determine what a business will be worth in the future. This involves building detailed financial models and stress-testing assumptions. A key element is assessing dividend sustainability – ensuring companies can maintain or grow their payouts even during economic downturns. As highlighted in the article, JOHCM’s approach isn’t about predicting short-term market movements; it's about identifying long-term value that will eventually be recognized by the broader market.

Performance and Portfolio Characteristics

The fund has demonstrated a compelling performance track record. Over the past five years to October 2023, it delivered an annualised return of 11.5%, outperforming its benchmark, the FTSE All-Share Index (which returned 8.4% over the same period). Crucially, this strong performance has been achieved with a relatively low level of volatility compared to some peers. This suggests a degree of resilience and risk management within the investment process.

The fund’s portfolio is currently concentrated in around 30-40 stocks, reflecting JOHCM's conviction investing style. It holds significant positions in companies like Legal & General (a consistent dividend payer), British American Tobacco, Shell, and Glencore – all businesses that might be considered unglamorous but possess strong cash flows and attractive valuations. The article notes the fund’s willingness to invest in sectors often avoided by mainstream investors, such as tobacco and mining, which contribute significantly to its income generation. This demonstrates a commitment to their value-driven approach even when it goes against prevailing market trends.

Dividend Focus & Income Generation

As the name suggests, income is a core focus for this fund. JOHCM prioritizes companies with a history of consistent dividend payments and a strong ability to maintain or grow those dividends over time. The fund’s yield currently sits around 4%, which is competitive within the UK equity income space. This makes it attractive to investors seeking regular income streams, particularly in an environment where interest rates on savings accounts are fluctuating.

Fees & Charges – A Consideration for Investors

While the performance has been impressive, potential investors should be aware of the fund’s fees. The Ongoing Charges Figure (OCF) is 0.83%, which is slightly above the average for UK equity income funds. However, JOHCM argues that this cost is justified by the active management and value-driven approach, which aims to generate superior returns over the long term. As with any investment, it's crucial to weigh the costs against the potential benefits.

The Team & Investment Philosophy – A Key Differentiator

The article emphasizes the importance of the JOHCM team’s experience and unwavering commitment to their value investing philosophy. Richard Williams has been managing the fund for a significant period, providing stability and continuity in the investment process. JOHCM's culture fosters independent thinking and encourages managers to challenge conventional wisdom – essential qualities for successful contrarian investors. The firm’s long-term perspective is also highlighted as a key differentiator; they are not swayed by short-term market noise or fleeting trends.

Risks & Considerations

Investing in the JOHCM UK Equity Income Fund, like any investment, carries risks. The fund's contrarian approach means it can underperform during periods when growth stocks are heavily favored. The focus on dividend-paying companies also exposes investors to the risk of dividend cuts if those companies encounter financial difficulties. Furthermore, the concentrated portfolio increases the impact of any single stock’s performance on the overall fund return. Finally, as with all equity investments, there's inherent market risk – the potential for losses due to broader economic downturns or geopolitical events.

Conclusion: A Fund for Patient Value Seekers

The JOHCM UK Equity Income Fund offers a compelling proposition for investors seeking long-term capital appreciation and reliable income. Its disciplined value investing approach, experienced management team, and focus on dividend sustainability differentiate it from many peers. While the fees are slightly above average, the fund’s track record suggests that its active management can justify the cost for patient investors who believe in the power of identifying undervalued assets. However, potential investors should carefully consider their own risk tolerance and investment objectives before investing.

Disclaimer: I am an AI chatbot and cannot provide financial advice. This summary is for informational purposes only and does not constitute a recommendation to buy or sell any securities.