For financial professionals in the UK

Fund Manager October 2021 Commentary – City of London Investment Trust

Job Curtis, ASIP

Job Curtis, ASIP

Portfolio Manager

16 Nov 2021

In October 2021, the UK equity market produced a total return of 1.8%1, as measured by the FTSE All Share Index. Large companies outperformed, with the FTSE 100 Index of the largest 100 companies producing a total return of 2.2%, compared with 0.5% for the FTSE 250 Index of medium-sized companies.

A key factor behind the strong performance of the FTSE 100 Index was the banks sector, where investors anticipated the benefit from rising interest rates on banking profitability. Contrary to expectations, the Bank of England did not raise the base rate in November, although increases are expected over coming months given the rise in inflation. City of London’s best performing bank holdings in October were HSBC and Lloyds.

Wm Morrison Supermarkets left City of London’s portfolio in October as a result of the agreed takeover by Clayton, Dubilier & Rice, a US private equity firm. It is sad to lose a company of Morrison’s quality, given its high freehold property ownership of its supermarkets and differentiated, vertically integrated food strategy, sourcing and manufacturing a large proportion in the UK. On the other hand, after the bidding war between two private equity firms, shareholders probably received fair value for their shares. City of London retains a large holding in Tesco in the food retailing sector.

Despite some tax rises in the Budget, the overall fiscal position remains expansionary as does monetary policy with record low interest rates continuing in the UK and overseas. Overall, this should be positive for the growth of the economy as well as corporate profits and dividends, although inflationary pressures will be a headwind for some companies. The UK equity market’s dividend yield remains attractive relative to the main alternatives.

Source: Bloomberg, FTSE All Share Index as at 29th October 2021.

Inflation Expand

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

Fiscal policy Expand

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.

Monetary policy Expand

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.

Yield Expand

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.