CT UK Equity Income
CT UK Equity Income is managed by the highly experienced Jeremy Smith. He looks for unloved companies listed on the London Stock Exchange, with the ability to sustainably grow their dividends. The fund is unconstrained and has a ‘contrarian value’ bias. Jeremy looks for hidden gems and businesses with long term potential.
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Jeremy Smith, Lead Manager Jeremy Smith is Co-Head of UK Equities and a portfolio manager at Columbia Threadneedle Investments, where he has been since 2015. He manages the CT UK Growth & Income Fund, CT UK Equity Income Fund, and CT UK Equity Alpha Income Fund. Jeremy also heads UK Equity Research, focusing on the oil services and support services sectors. With over 20 years of experience, he has previously held roles as Head of UK Equities at Neptune Investment Management and Director in the UK large cap team at Schroders. Jeremy holds a BA (Hons) in History and is a Chartered Management Accountant (ACMA).
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Talking Factsheet
Investment process
This is a contrarian fund that identifies undervalued stocks by looking at the general macroeconomic environment but also using stock selection. Jeremy is extremely experienced and manages the fund in a very similar way to his predecessor. He avoids speculative stocks, even when they are fashionable and have short-term momentum. Instead, he looks for unloved companies with the ability to sustainably grow their dividends. Jeremy believes in being patient and not over-trading. He embraces the ‘think active, act lazy’ philosophy, which has been a consistent feature of this fund.
The team pays particular attention to the implications of change at the stock, industry, sector, regional and macroeconomic level, and has found that analysing these implications consistently highlights mispriced opportunities. The team is particularly interested in companies whose profitability has fallen below the historic average. Valuation is extremely important.
Stocks fall into three risk buckets: defensives, average risk and higher risk. The team is pragmatic when it comes to risk management. It is not anchored to price targets. Once the portfolio is built Jeremy is patient as it can take years for contrarian calls to work.
Jeremy is fairly unconstrained in how he puts the portfolio together. There are no restrictions on the size of company he can invest in, though he will keep the portfolio predominantly in large cap companies. The fund’s best hunting ground is typically the bottom of the FTSE 100. Stock selection will drive the fund’s composition, meaning it will be Jeremy’s best ideas, rather than any benchmark weights, although the income mandate will affect sector allocations. Sector allocation has been consistent, with very little in technology companies and large weights in industrials. This is to be expected with Jeremy’s contrarian approach and the fund’s need to produce an above average income. The final portfolio will have a maximum 60 companies.
Risk
The fund is likely to perform better in value markets. The fund is likely to have a domestic bias, and therefore will also likely perform better when the UK economy is performing in line with, or above, its global counterparts.
ESG
Columbia Threadneedle has a firm-wide approach to considering ESG factors. It has a universal process embedded across all its strategies which provides a proprietary ESG score for each stock. This is performed by the independent Responsible Investment team that prepares its own detailed analysis on each stock from an ESG perspective. By having a specialist team dedicated to this, the analysis drills down on every aspect of ESG and the team is not distracted by financial factors.
Industry standard frameworks, such as the Sustainability Accounting Standards Board (SASB), are used, as well as guidance from the Taskforce on Climate Related Financial Disclosures to help build models. This score is then provided to the equity analysts and managers who use it alongside their fundamental analysis to assess companies. The score will also be used as a basis from which to engage with the respective companies on any issues identified.
The requirement for income means Jeremy will be prepared to take some ESG risk in industries that have challenges. However, these will be in firms that are improving their profile and are consciously tackling their ESG issues rather than ignoring them.
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