Fund Manager commentary - City of London Investment Trust



In June, the UK equity market produced a total return of 3.7%, as measured by the FTSE All Share Index. The FTSE 100 Index of the largest companies outperformed with a total return of 4.0% compared with 2.9% for the FTSE 250 Index of medium-sized companies that are more biased to the domestic economy. There was some cautious UK survey data with the IHS Markit purchasing managers’ composite index at 49.2 which signals a fall in private sector economic activity. There was a further small decline in 10 Year Gilt yields to the historically low level of 0.83%. However, it may be that UK growth is somewhat erratic this year after the boost to activity from stock building ahead of the first Brexit date (31 March 2019.)

The mining sector was a notable outperformer. Commodity prices have been firm reflecting resilient global demand and supply disruption in iron ore. City of London benefited from its holdings in Rio Tinto, BHP and Anglo American. In contrast, the general retailing sector was a significant under performer with profits for many traditional retailers under pressure from the internet. City of London is under represented relative to the market average in retailers. In addition, the holding in Unibail-Rodamco-Westfield, the owner of shopping centres, was sold. Carnival, which is in the portfolio, had a poor month after it downgraded profit forecasts for this year. In our view, long-term prospects remain good for Carnival given its leading position in the cruise ship sector.

The UK stock market has exposure through the companies which are listed on it to a mixture of the domestic as well as the global economy. UK equities continue to offer an attractive dividend yield compared with the main alternatives.

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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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 investment products and services are provided by Janus Capital International Limited (reg no. 3594615), 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 registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). 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.

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