For financial professionals in the UK

Fund Manager May Commentary – City of London Investment Trust

Job Curtis | Janus Henderson Investors
Job Curtis, ASIP

Job Curtis, ASIP

Portfolio Manager

15 Jun 2021
5 minute read

In May, the UK equity market produced a total return of 1.1%, as measured by the FTSE All Share Index. The FTSE 100 Index of the largest companies also returned 1.1% while the FTSE 250 Index of medium-sized companies returned 1.0%. Economic growth picked up, helped by the reopening of many sectors of the economy and by the accommodative monetary and fiscal policy in place. On the other hand, inflation rose partly due to the higher oil price.

Among sectors, travel & leisure was a notable underperformer with visits to many countries restricted for UK citizens. City of London has significantly less exposure than the market average to this sector which may take longer to recover than expected and offers little in dividend payments. The cruise line industry has been particularly badly affected by the pandemic and City of London’s holding in Carnival has suffered. However, Carnival’s valuation has recovered from the lows, especially if its additional debt is taken into consideration and it was decided to sell City of London’s holding.

The utilities sector had a satisfactory reporting season for 12-month results. Additions were made to City of London’s holdings in National Grid, Severn Trent, SSE and United Utilities. All these companies increased their dividends. It was also pleasing to see the strong share price performance from M&G, the fund manager and life assurer, which is one of City of London’s ten largest holdings. It was revealed that Schroders, the fund manager, had considered acquiring M&G.

Economic growth is expected to remain strong with pent-up consumer demand for goods and services and the high level of the savings ratio. It is questionable how long quantitative easing and ultra-low interest rates can remain in place given rising inflationary pressures. The dividend yield of UK equities remains attractive relative to the main alternatives and the outlook for dividend payments is much improved given economic growth in the UK and overseas.



Absolute/Total return – The total return of a portfolio, as opposed to its relative return against a benchmark. It is measured as a gain or loss, and stated as a percentage of a portfolio’s total value.

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.

Quantitative easing (QE) – An unconventional monetary policy used by central banks to stimulate the economy by boosting the amount of overall money in the banking system.

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.

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.