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

Macro backdrop

In May, the UK equity market returned 0.7%, as measured by the FTSE All Share Index. Large companies outperformed with the FTSE 100 Index returning 1.1% compared with a negative return of 1.1% for the FTSE 250 Index of medium-sized companies. A key factor behind the strength of the FTSE 100 was its exposure to oil, which was the best performing sector as the oil price rose 10% to $116 per barrel. The rising cost of oil led to a further rise in UK inflation as measured by the Consumer Price Index (CPI) to 9.0% in April (up from 7.0% in March). The Bank of England increased rates by a further 25 basis points to 1.0%, the highest level in 13 years, but there was a more dovish tone to its commentary given slowing UK economic growth.¹

Trust performance and activity

The City of London Investment Trust returned 1.2% in May, slightly ahead of the FTSE All Share Index which returned 0.7%.¹ Shell and BP, which are both large holdings in the portfolio although below the FTSE All Share Index weighting, were notable outperformers. The bank sector benefited from the rise in interest rates and holdings in HSBC and Barclays performed well. Sentiment turned against Segro, the owner of industrial property and warehouses in the UK and Europe. Segro has been a strong outperformer for the portfolio in recent years but was a notable casualty in May. The catalyst for the share price decline may have been Amazon revealing it had too much warehouse space in the US.

In terms of activity, we added to the holding in TotalEnergies, the international oil company headquartered in France. We also took some profits in Brewin Dolphin ahead of the completion of its takeover by Royal Bank of Canada. The proceeds were reinvested into a new holding in Rathbones, also in the wealth management sector, which has historically showed structural growth characteristics.


Given the level of inflation, it is likely that central banks will continue to raise interest rates, slowing economic growth further. Although this is a challenging backdrop for markets, interest rates are rising from a historically low level. The dividend yield on UK equities remains attractive relative to the main alternatives.

¹Source: Bloomberg as at 31 May 2022