For financial professionals in the UK

Fund Manager December 2021 Commentary – City of London Investment Trust

Job Curtis, ASIP

Job Curtis, ASIP

Portfolio Manager

26 Jan 2022
4 minute read

During December, the UK equity market produced a total return of 4.7%, as measured by the FTSE All Share Index. Large companies slightly outperformed, with the FTSE 100 Index returning 4.8% compared with 4.4% for the FTSE 250 Index of medium-sized companies1. The key event during the month was the decision by the Bank of England to increase its Bank Rate from 0.1% to 0.25%. This move was in response to the increase in inflation, especially from rising energy prices, and with economic output having recovered almost all of the pandemic losses.

A notable outperformer during the month was British American Tobacco (BAT) where City of London has a large holding. BAT indicated, at its pre-close trading update, further progress in the growth of its less harmful products, continuing reduction in its debts and the possibility of a share buy-back going forward. On the other hand, Synthomer, the chemicals group, was a marked underperformer from City of London’s portfolio, on concerns about increasing supply in the nitrile it makes, which is used in products such as rubber gloves. An addition was made to City of London’s holding given the attractive share price valuation for a company with a technology leadership position in diverse, speciality chemistries. Some profits were taken in mining groups, Anglo American and BHP, after their strong performance in 2021 due to higher than expected commodity prices.

Looking forward, further interest rate increases can be expected, given the rise in inflation. However, the dividend yield of UK equities remains attractive relative to the main alternatives.

Glossary Expand

The repurchase of shares by a company, thereby reducing the number of shares outstanding. This gives existing shareholders a larger percentage ownership of the company. It typically signals the company’s optimism about the future and a possible undervaluation of the company’s equity.

Dividend yield is the financial ratio that measures the quantum of cash dividends paid out to shareholders relative to the market value per share. It is computed by dividing the dividend per share by the market price per share and multiplying the result by 100. A company with a high dividend yield pays a substantial share of its profits in the form of dividends. Dividend yield of a company is always compared with the average of the industry to which the company belongs.

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.