Fund Manager August 2021 Commentary – City of London

In general, companies announced good half-year results reflecting the recovery of the UK and overseas economies from the pandemic lows as sectors and activities reopened. Mining companies have benefited from higher-than-expected commodity prices caused by strong demand from China. There were big dividend increases from Rio Tinto, BHP and Anglo American, where City of London has shareholdings.

A complete sale was made from the portfolio of the relatively small holding in Hammerson, the owner of shopping centres in the UK, France and Ireland. The outlook for shopping centres remains difficult due to the growth in internet shopping and Hammerson’s indebtedness is relatively high.

Economic growth should continue to be strong given the scale of monetary and fiscal stimulus. With inflation rising, central banks could start to reduce quantitative easing, which would test markets. The dividend yield on UK equities remains attractive relative to the main alternatives.

¹ Source: FTSE Russell as at 31 August 2021

A physical good such as oil, gold or wheat. The sale and purchase of commodities in financial markets is usually carried out through futures contracts.

The rate at which the prices of goods and services are rising in an economy. The CPI and RPI are two common measures.

Government policy relating to setting tax rates and spending levels. It is separate from monetary policy, which is typically set by a central bank. Fiscal austerity refers to raising taxes and/or cutting spending in an attempt to reduce government debt. Fiscal expansion (or ‘stimulus’) refers to an increase in government spending and/or a reduction in taxes.

The policies of a central bank aimed at influencing the level of inflation and growth in an economy. It includes controlling interest rates and the supply of money. Monetary stimulus refers to a central bank increasing the supply of money and lowering borrowing costs. Monetary tightening refers to central bank activity aimed at curbing inflation and slowing down growth in the economy by raising interest rates and reducing the supply of money.

To deliver a return greater than that of a portfolio’s assigned benchmark. Also often called excess return.

An unconventional monetary policy used by central banks to stimulate the economy by boosting the amount of overall money in the banking system.

The level of income on a security, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.

References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security. Janus Henderson Investors, one of its affiliated advisors, or its employees, may have a position mentioned in the securities mentioned in the report.