For financial professionals in the UK

Fund Manager December Commentary – The City of London Investment Trust

Job Curtis

Job Curtis

Fund Manager

14 Jan 2021

During December, optimism continued about the effect that the vaccines should have in supressing Covid-19 and the eventual return to more normal social and economic activity. In addition, the UK agreed a trade deal with the European Union towards the end of the month. The UK equity market, as measured by the FTSE All Share Index, produced a total return of 3.9%. The FTSE 250 Index of medium-sized companies, which has a more domestic focus, returned 6.1%, significantly outperforming the FTSE 100 Index of the largest companies which returned 3.5%.

In general, sectors exposed to economic activity did well while more defensive areas underperformed. The mining sector was a notable outperformer buoyed by strong Chinese demand for commodities, such as iron ore. City of London benefited through its holdings in Rio Tinto, BHP and Anglo American. In contrast, the large holding in Unilever, the multinational consumer goods group which had held up well for most of the year, gave back some ground in December. There has been a similar pattern of share price performance for AstraZeneca, which was a notable underperformer in December, despite its Covid-19 vaccine having been approved.

During December, complete sales were made of City of London’s holdings in Spirax-Sarco Engineering and Halma, both of which have performed exceptionally over the years but, in our view, their share price valuations now seemed expensive. The proceeds were switched into other holdings in the portfolio, such as Wm Morrison, the food retailer, and Direct Line Insurance.

The first quarter of 2021 is likely to be a difficult one for the UK economy with the resurgence of the Covid-19 virus and the third national lockdown. Looking further ahead, it is possible to be much more optimistic as the vaccines are rolled out and the economy reopens. Given the amount of monetary and fiscal stimulus and the high level of personal savings, growth could surprise to the upside in the second half of the year, which would provide a supportive background for company profits and dividends.


Commodity: 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.

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. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.


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.


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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 diversified across more countries.
  • Where the Company invests in assets which are denominated in currencies other than the base currency then 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 in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this Company.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental 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 as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incured 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.