City of London calling

This has undoubtedly been the consensus view in 2015, yet long-term institutional investors both need and are often required to have emerging markets' exposure. Main market-listed City of London Investment (CLIG) has proved itself to be an adept manager of alternative global funds, and since 1991 has steadily accrued a reputation among its institutional clients that outweighs its £100m market capitalisation. For investors, shares in the boutique company also offer a market-leading dividend yield and good earnings growth prospects even though their rating is low compared with the listed heavyweights.

City's investment belief is simple. Its fund managers believe there is greater value in purchasing deeply-discounted assets in rapidly-developing economies than buying, say, US assets at inflated prices. It does this by investing exclusively in closed-end funds in London and elsewhere, whose pricing structure the City sees as systematically inefficient and thus more valuable. City's managers take a macroeconomic-based approach to each investment, and pick funds with the greatest exposure to high-growth countries, industries and companies. This has helped City outperform its benchmarks over 20 years on an annualised basis.

This is a key reason for the loyalty of City's clients, over 95 per cent of which are US-based long-term institutional investors, such as pension or endowment funds. Despite global stock market volatility, the group increased funds in its emerging markets strategies area by $40m in the 12 months to June, and expects a further $250m this year. To counter subdued appetite for emerging markets, City has developed several diversification products, which accounted for $235m of inflows last year, and should lead to similar increases this year.

This should help to further widen profit margins and boost the profits that will underpin the dividend (cover is just 1.1 times the 24p a share payout). Widening margins from cost control and a gradual decrease in commission payments should also help City's plans to increase the dividend.

City also has the sort of shareholder base that you'd expect in a small company. None of its high-profile institutional backers - which include BlackRock, Hargreave Hale and Slater Investments - own more than 8 per cent of the company, while 22.5 per cent is split between chief executive Barry Olliff, directors and employees. That may also help underpin the dividend, but dealing in the shares can be tricky. The spread can get wide, although recent trading has seen deals everyday.