October Commentary - City of London

13/11/2017

Download

​UK equities produced a total return of 1.9% in October, as measured by the FTSE All Share Index. The FTSE 100 Index of the largest companies produced a total return of 1.8%, slightly behind the FTSE Mid 250 Index of more domestically focussed medium-sized companies, which produced a total return of 2.0%.

Reflecting global economic growth, commodity prices were strong with oil up 7.2% and copper up 6.0%. Discipline in allocating capital expenditure from oil and mining companies has led to a reduction in new supply coming onto the market. An addition was made to the Trust’s large holding in Royal Dutch Shell where confidence has grown in the sustainability of its dividend with the higher oil price and after it has significantly cut costs. The Trust’s holding in BHP Billiton was also added to because it appears significantly undervalued at the current level of commodity prices and offers an attractive dividend yield.
 
Defensive sectors, including utilities, pharmaceuticals and telecoms, underperformed. The imminence of a rise in UK interest rates had a negative effect on some of these sectors which are considered “bond proxies.” A reduction was made in the Trust’s holding in United Utilities given indications that the next water sector regulatory review will be tough.
 
The housebuilding sector had another strong month. Some profits were taken in Berkeley Group which is focussed on the London residential market where house prices have been falling.
The growth being experienced from the main economies of the world, including the UK, is positive for corporate profits. The dividend yield from UK equities remains attractive relative to the main alternatives.
 
Glossary-
Bond proxy: An equity perceived to pay safe and predictable income with low volatility – characteristics that are more commonly associated with bonds. They are typically drawn from the utility, consumer staple and pharmaceutical sectors. They might be added to a portfolio to imitate bonds, hence their name.

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), 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

  • 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

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.