Ever wanted to get into investing in the stock market, but don’t know where to start? Or are you at that point in your life where you have a few pounds square, and want to create a second income, but still have the chance to grow your capital? The City of London Investment Trust [LON:CTY] might be the choice for you.
This GBP2bn is no spring chicken, having been launched in January 1891. To put that longevity in context, when the City of London Investment Trust was established, Tchaikovsky was still conducting symphony orchestras, the first Sherlock Holmes stories were being serialised, and Tesla was still in the news – but for inventing the Tesla Coil.
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The Investment Trust is today managed by Janus Henderson, the Australian-British asset manager with GBP250bn assets under management and is run by Job Curtis who has been on board since 2006 and at Henderson since 1992. Curtis joined Henderson when the company he was working at since 1987, Touche Remnant, was acquired by Henderson. Touche Remnant had been managing the investment trust since 1970. Curtis is assisted by David Smith who has been in the game since 2002.
60% of the portfolio invested in large caps
The fund aims to provide long-term growth in income and capital, and invests primarily in LSE-listed equities, but has the flexibility to invest in fixed income, including convertibles, corporate bonds and government debt. The investment trust has a large cap bias with on average 60% of the total portfolio invested in large cap companies in excess of GBP5bn. The City of London fund also has the flexibility to invest up to 20% of the total portfolio in overseas stocks. The fund is sector-agnostic and follows a bottom-up stock picking approach, analysing individual companies to identify those with the potential for strong future growth and returns.
Curtis is a strong advocate of UK Equities, believing that they – especially the big beasts – offer better dividend yields than other equity markets and when compared to its peers, London-listed companies are still attractive from a valuation basis.
However, the differentiator between the City of London Investment Trust and other UK large cap investment trusts is the City of London’s focus on dividends, which the fund says will be between 10% and 30% above the average UK equity market. A lot of funds say that they look to deliver dividends, City of London has been delivering rising dividends for 57-years. To put that in context, the fund has been paying dividends since Bobby Moore was lifting the football World Cup in 1966, and had you invested GBP1,000 at that time, your investment would be worth GBP811,000 today, according to Janus Henderson.
The fund is benchmarked against the FTSE All-Share index and at the end of December had net gearing of 5%, a yield of 4.9% and held 84 stocks. The fund’s ongoing charges are 0.37% and is available through most investment platforms.
Outperforming its benchmark
Predominantly City of London has outperformed its benchmark, however in 2023 it was a bit behind with a NAV Total Return of 6.5% against a 7.9% return for the FTSE All-Share, which could be a result of large cap companies performing less well than the mid- and small-cap peers in 2023. Over three-years the picture looks rosier, with City of London returning 34.4% against a benchmark return of 28.1%. Over 10-years the investment trust had a NAV Total Return of 73.2% against a return for the All-Share of 68.2%. The company’s shares opened the week at 398.96p and were down 6% over one-year.
City of London Investment Trust top five holdings
| Company | Weighting | Country |
| Shell LON:SHEL | 4.06% | United Kingdom |
| BAE [LON:BA.] | 3.97% | United Kingdom |
| Relx LON:REL | 3.72% | United Kingdom |
| HSBC LON:HSBA | 5.1% | United Kingdom |
| Unilever LON:ULVR | 4.6% | United Kingdom |
Source: Janus Henderson Investors 31/12/23
The City of London Investment Trust has been a dividend monster for decades – and it is unlikely that this situation will change any time soon. Also, the company is a good reflection of the FTSE All-Share, so for someone dipping their toes in the water it’s a great choice too.
