Janus Henderson UK Responsible Income Class I - Income (GBP)

The fund's performed well over the long term, comfortably beating its peers in the IA UK Equity Income sector. Our analysis suggests Jones' ability to select companies with outstanding prospects, regardless of their size or the sector they're in, boosted returns, although past performance is no guide to the future.

Like all funds, this one has had weaker periods too. After the Brexit referendum in 2016, for instance, the fund underperformed the UK market and other UK equity income funds. A focus on UK-centric firms and less exposure to companies that earn a significant proportion of their money overseas held back returns.

The fund's exclusions mean we expect it to perform differently to the broader UK stock market, and its peers in the IA UK Equity Income sector. Oil & gas, for instance, makes up a relatively large part of the UK stock market, and has tended to pay high dividends, so the sector features heavily in many equity income funds. This fund's lack of exposure to oil & gas means it could underperform the UK market, and other equity income funds, if oil & gas firms perform well.

Jones invests in companies that generate plenty of cash flow, and that are attractively valued, and aims to hold them for several years. He believes this is the best way to deliver a good level of income alongside capital growth over the long term.

The investment process starts with a screen which excludes companies across three areas:

Impact on people: alcohol, armaments, gambling, pornography and tobacco

Impact on the environment: fossil fuel extraction & refining, chemicals of concern, contentious industries, nuclear power and fossil fuel power generation (although companies generating power from natural gas may be allowed if the company's strategy includes a clear plan to transition to renewable energy power generation).

Impact on animals: animal testing (non-medical), fur and genetic engineering

All investments must also be compliant with the UN Global Compact (a United Nations pact on human rights, labour, the environment and anti-corruption).

From the remaining universe, Jones looks for companies with proven and understandable business models, high-quality management teams and strong positions in their industries. He thinks about how the company defends its position through competitive advantages like brands and intellectual property, and whether those advantages can endure over time. He also likes companies in a strong financial position with plenty of cash flow, allowing them to reinvest for future growth, while at the same time rewarding shareholders with rising dividends.

Finally, he considers the company's valuation, applying a range of valuation techniques that are relevant to the company and the industry it operates in.

The manager also integrates ESG and considers whether companies are doing the right thing. The Global Equity SRI team monitors the fund and provides robust challenge on any ESG issues that crop up over time. Where ESG risks are identified, Jones and his team often engage with the company to help drive improvement.

Jones uses his flexibility to invest up to 20% of the fund overseas to access areas that aren't available in the UK, or to add diversification during times of uncertainty, such as the 2016 Brexit referendum and the onset of the Covid-19 crisis early in 2020.

The focus is on large and medium-sized companies, although the manager does have the flexibility to invest in higher-risk smaller companies too.

Please note the fund takes charges from capital, which could boost the income, but reduces the potential for capital growth.