For financial professionals in the UK

Fund manager August commentary – The City of London Investment Trust

Job Curtis, ASIP

Job Curtis, ASIP

Portfolio Manager

16 Sep 2020

During August, the UK equity market produced a total return of 2.4% as measured by the FTSE All Share Index. The FTSE 100 Index of the largest companies underperformed with a total return of 1.7%. This partly reflected the weakness of the US dollar, which fell from an exchange rate of 1.24 to 1.34 against sterling over the month. The FTSE 100 Index includes many large, multinational companies with US dollar earnings. The FTSE 250 Index of medium-sized companies, which has a more domestic focus, outperformed with a total return of 5.4%. This partly reflected rising optimism about the recovery of the UK economy.

The travel and leisure sector was a notable outperformer but City of London remains underweight because recovery for this sector may take longer than expected due to social distancing. Beverages was a particularly weak sector after Diageo’s full year results disappointed the market but its dividend was up by 1.9% compared with the previous year. Diageo has been a successful long-term holding for City of London and benefits from a world leading position in spirits, with brands such as Johnnie Walker whisky, as well as Guinness beer.

A complete sale was made from the portfolio of Renishaw, the precision measuring equipment company. Renishaw has been an exceptionally strong share price performer but its valuation seemed too high given the recent downturn in its trading. The proceeds were invested in existing positions in the portfolio.

It is pleasing that a number of companies in City of London’s portfolio have recently restored dividends, such as BAE Systems and Direct Line Insurance. As confidence grows in the ability of companies to grow their dividends, the attractive yield of UK equities relative to the main alternatives will become more apparent.


Dividend: A payment made by a company to its shareholders. The amount is variable, and is paid as a portion of the company’s profits.

Yield: 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.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


Marketing Communication.






Important information

Please read the following important information regarding funds related to this article.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.
    Specific risks
  • If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
  • Where the Company invests in assets that are denominated in currencies other than the base currency, the currency exchange rate movements may cause the value of investments to fall as well as rise.
  • This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
  • The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
  • The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.
  • All or part of the Company's management fee is taken from its capital. While this allows more income to be paid, it may also restrict capital growth or even result in capital erosion over time.