Fund Manager commentary - City of London Investment Trust



​In February, the UK equity market produced a total return of 2.3% as measured by the FTSE All Share Index. The UK Government reported strong tax receipts indicating that the domestic economy might have grown faster in 2018 than had been previously measured. The FTSE 250 Index of medium-sized companies, which is more domestically focussed, returned 2.6% slightly outperforming the FTSE 100 Index of the largest companies, which has an international bias and returned 2.3%. 

During the month, a number of leading companies reported financial results and they were in general in line with expectations. Leading housebuilders reported good financial results, including Taylor Wimpey which is a large position in City of London’s portfolio. Lloyds Banking was a notable outperformer among the Fund’s larger holdings as it announced a 5% increase in its ordinary dividend. The pharmaceutical sector also did well with AstraZeneca particularly strong after it reported progress on new medicines. The Fund has a stake in AstraZeneca but is under represented relative to the market average. Travel group TUI was City of London’s biggest stock contributor in its last financial year but it had a disappointing update in February leading to a significant fall in its share price.

In terms of portfolio activity, further additions were made to financial services group St James’s Place which appears to offer above average growth at a reasonable share price valuation. The holding in Marks & Spencer was reduced by one-third as it announced the purchase of 50% of Ocado’s UK retail business and a 40% cut in its dividend and ahead of an equity raising.

The dividend yield of the UK equity market remains attractive relative to the main alternatives. Dividend announcements from companies have in general been satisfactory recently.

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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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.

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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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