June Commentary: City of London

10/07/2017

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​The UK equity market produced a negative return of 2.5% in June as measured by the FTSE All Share Index. Political uncertainty after the Conservative Party lost its overall majority and deteriorating consumer confidence led to the more domestic FTSE Mid 250 Index of medium-sized companies underperforming with a negative return of 2.9%. The more international FTSE 100 Index of the largest companies produced a negative return of 2.4%.

The worst performing sector was utilities which was adversely affected by the Labour Party’s threat of renationalisation and by the lead up to the next water sector regulatory review. Utilities, where City of London is overweight, has been a good sector for both income and capital returns over many years. A reduction in the Trust’s exposure to the water sector was made. The life insurance sector, where City of London has above average exposure, was a notable outperformer, benefiting from the rise in gilt yields.
 
A new holding was purchased in Rotork, the leading manufacturer of actuators, which control valves for process industries, including oil and gas, where orders are improving. Rotork appeared to offer relatively good value given the quality of its operations and after share price underperformance compared with the average of other capital goods companies. The Trust’s holding in Berendsen was sold after a takeover approach led to a sharp rise in its share price.

The dividend yield from the UK equity market remains attractive relative to the main alternatives. Growth across all the main economies of the world should be supportive for rising company profits and dividends.

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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