March Commentary: City of London

12/04/2017

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UK equities returned 1.2% in March as measured by the FTSE All Share Index. The return for the first quarter of 2017 was 4.0%. UK CPI inflation for the year to 28th February was announced to have risen to 2.3%. This was caused by the fall in sterling and the rise in commodity prices. Overseas, the US Federal Reserve raised its Federal Funds rate by 25bps to 1.0%.

The Trust’s largest holding, British American Tobacco, was a notable outperformer ahead of the closing of the deal to buy out the 57% that it does not already own of its US subsidiary Reynolds American. Energy providers SSE and Centrica, where the Trust is overweight relative to the market average, were underperformers on fears over UK government interference. However, both stocks have a broad range of utility activities and attractive dividend yields which we consider to be safe. A new holding was bought in Aviva which has good prospects from its spread of general and life insurance operations in the UK and overseas. A new holding was also purchased in DFS, the furniture retailer, on an attractive valuation and it subsequently announced a special dividend. The holding in Interserve, the support services group, was sold after its disappointing results and suspension of its dividend.

While there may be some pressure on UK consumers from rising inflation, exporters are benefiting from the fall in sterling and economic growth should be underpinned by low interest rates. Overseas, economic growth is picking up in Europe and continues in the US and Asia Pacific. Against this background, we are cautiously optimistic about the prospects for UK equities given the attractive dividend yields available.

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.


Important information

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), Henderson Investment Management Limited (reg. no. 1795354), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited (reg. no. 1508030), (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. Telephone calls may be recorded and monitored.

Specific risks

  • 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
  • If a fund is a specialist country-specific or geographic regional fund, the investment carries greater risk than a more internationally diversified portfolio
  • Not all the investments in this portfolio are made in Sterling, so exchange rates could affect the value of and income from your investment

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