The City of London Investment Trust

Investment trust

Launched in 1891, the City of London Investment Trust is one of the longest-running investment trusts in the UK. It aims to provide growth in income and capital by investing predominantly in larger UK companies with international exposure. It has increased its dividend payment every year for the past 56 years.

Our opinion

The City of London Investment Trust is a well-established income and growth trust run by an experienced manager, Job Curtis, who has run the trust for more than three decades. His thorough research process and conservative approach to stock selection have generated steady returns over a long time. Maintaining dividend income is of the utmost importance to the board, making the City of London Investment Trust an excellent core option for investors wanting UK equity income exposure. It is very good value: it charges 0.325% per annum of net assets under management.

Trust manager

I have a conservative personality and it is reflected in the portfolio. I pay attention to the downside risks as well as the upside potential.

Job CurtisTrust manager

Investment board

The board is chaired by Sir Laurie Magnus, who has over 40 years of experience in corporate finance markets and over 15 years as a member of investment supervisory bodies. He is currently a non-executive adviser to Evercore’s European business and holds several external appointments, including the JPM Multi-Asset Trust Plc.

The other board members are Martin Morgan, Samantha Wren, Ted Holmes and Clare Wardle. They have a wealth of experience, particularly in the areas of investment management and accountancy. The board meets with the investment team seven times a year and the company year-end is 30 June.

Investment process

Job focuses on companies that can pay and increase their dividends over time. He pays close attention to valuations and is careful not to overpay when he initiates positions. He particularly likes companies with a competitive advantage and has historically favoured multi-national brands with stable earnings and growth prospects. He has a bias towards large caps, with 60% of the portfolio typically held in companies that sit in the FTSE 100. However, there is a bias within this as the City of London Investment Trust prefers international companies (listed in the FTSE 100) as the managers believes these economies are likely to grow faster than the UK.

Job aims to provide shareholders with dividends between 10% and 30% higher than the average for the UK equity market. Dividends are distributed quarterly.

ESG

ESG - Integrated
Job considers all factors that could affect his portfolio, and therefore blends the evaluation of ESG factors with quantitative financial analysis. Whilst all elements are important, governance is a key part of the fundamental analysis of a business, due to the impact of long-term decision-making by management teams on investment returns. Environmental and social factors are assessed more qualitatively, and their impacts can vary by sector and geography. Job uses a range of sources.

First is Janus Henderson’s internal research platform which is populated by the in-house analyst team. This provides a centralised research platform to find information on all stocks in the universe and is supported by a range of different third-party data sources, which help to fill any gaps in coverage and ensure there aren’t any major issues that are missed. Finally, there is an internal Governance and Responsible investment team to monitor the overall ESG environment and identify any market developments. All of this goes into the evaluation of a stock, and Job can decide whether the impacts are material enough to affect the investment case.

Risk

This trust invests primarily in UK equities, although it does have the flexibility to invest up to 20% in overseas equities. Stock specific risk is somewhat mitigated by the number of stocks Job holds, which is typically around 100.

Gearing

The City of London investment trust will at times use limited gearing, both short and long term, to enhance performance. In exceptional market conditions, gearing will not exceed 20% of net asset value at the time of drawdown of the relevant borrowings. The company also has some Private Placement Notes with the board taking out the additional loan to secure long-term fixed funding at an attractive rate.

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