November Commentary: City of London



​Following nine months of positive returns, the UK equity market produced a negative return of 1.6% in November, as measured by the FTSE All Share Index. Sterling had a better month and was up 2.3% against the US Dollar and 5.8% against the Euro. The FTSE 100 Index, which is predominantly comprised of large, international companies, produced a negative return of 2.0% underperforming the more domestic FTSE Mid 250 Index of medium –sized companies which returned 0.1%.

Bond yields rose across major markets partly in response to Donald Trump winning the US Presidential election and the expectation that he might pursue an economic policy with greater focus on growth. Within the UK equity market, the insurance sector benefited from the rise in gilt yields and was the best performing sector with a return of 6.0%.  City of London’s portfolio is overweight in insurance compared with the average for the Index. The worst performing sector was telecoms (negative return of 9.2%) which as a defensive sector suffered from the comparison with rising bond yields. City of London is also overweight in telecoms where the companies held in the portfolio seem to offer an attractive combination of growth and income.
A new holding was purchased in Civitas which is a Real Estate Investment Trust specialising in social housing with a projected dividend yield of 5.5%. Profits were taken in Greencore, the food manufacturer, which is making a large acquisition in the US. While there is much uncertainty given the political surprises during 2016, the policy response is likely to stimulate growth which could be beneficial for most companies. We believe the dividend yield of UK equities remains attractive relative to the main alternatives.

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 is not a guide to future performance. 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.

The City of London Investment Trust plc

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.

Past performance is not a guide to future performance. 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. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Specific risks

  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • 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.
  • The trust could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the trust.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.

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