For individual investors in the UK

The City of London Investment Trust Fund Manager Commentary – July 2022

Job Curtis, Portfolio Manager of The City of London Investment Trust, provides an update on the Trust, highlighting factors currently affecting the UK market, the key drivers of performance in July, and outlines recent portfolio activity.

Job Curtis | Janus Henderson Investors
Job Curtis

Job Curtis

Portfolio Manager


26 Aug 2022
2 minute read

Macro backdrop

The UK equity market returned 4.4%, helped by favourable corporate results from the first six months of 2022. UK inflation hit a new 40-year high of 9.4% in June, up from 9.1% in May, while the UK economy unexpectedly grew by 0.5% in May, after shrinking 0.2% in April.¹ Within the equity market, the FTSE 250 Index of medium-sized companies outperformed with a total return of 8.3%.²

Trust performance and activity

The Trust produced a total return of 2.9%, underperforming the FTSE All Share Index which returned 4.4%. This underperformance was partly due to the portfolio being predominantly invested in large companies.²

The two biggest stock detractors were the holdings in motor insurers Direct Line and Sabre, where premiums have not kept pace with the rising cost of claims. Notable positive contributors included holdings in Ibstock, the brick maker, and IG Group, the online trading company, which both reported better-than-expected results.³ In terms of activity, we bought a new holding in NatWest, which has been benefiting from rising interest rates and bond yields, and also announced a special dividend.

Outlook/strategy

City of London has a diversified portfolio with positions in sectors that we think are well positioned to cope with current inflationary pressure, such as consumer staples and oil. In addition, it has significant holdings in financial sectors, where rising interest rates and bond yields are typically a helpful tailwind. In general, satisfactory profits and dividends were announced in the recent corporate reporting season while the yields found on UK equities remains attractive relative to the main alternatives.

CTY July 2022(1)

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.

 

Marketing Communication.

 

Glossary

 

 

 

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 trust'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 trust 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 trust 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 trust.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • The trust could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the trust.
  • 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 trust’s shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the trust. As a result losses (or gains) may be higher or lower than those of the trust’s assets.
  • The trust may use gearing as part of its investment strategy. If the trust utilises its ability to gear, the profits and losses incured by the trust can be greater than those of a trust that does not use gearing.
  • All or part of the trust'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.