March Commentary: City of London

12/04/2017

Download

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.

For promotional purposes.


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), 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.

Risk rating

Share

Discuss

 
 
[##ImageTip_CAPTCHA]
 

Important message

Fund name changes

Please note that from the 15 December 2017 funds previously named Janus or Henderson have been renamed Janus Henderson. This change aligns our product names with our name, Janus Henderson Investors, following the merger of Janus Capital and Henderson Global Investors in May 2017.

This name change does not impact on the management of the underlying funds and investors and advisers are not required to take any action. This does not affect Janus Henderson’s range of investment trusts.