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City of London attracts more funds

Diversification will help to cushion the effects of market volatility
February 21, 2018

City of London Investment Group (CLIG) manages portfolios that invest in emerging markets through closed-end funds, and while sterling’s recovery against the dollar threatened profits, this was more than offset by a strong performance in emerging markets.

IC TIP: Buy at 421p

Funds under management at the December 2017 half-year-end totalled to $5.3bn (£3.9bn), up from $4.1bn a year earlier, and rising further in January this year to $5.8bn. Once again, diversification products – which includes global tactical asset allocation and developed markets closed-end funds – continued to attract new business, pushing funds under management to over $500m. This has been more than enough to offset a reduction in emerging market assets as clients rebalance their investments.

However, its core emerging markets products lagged the very buoyant market in the final quarter of 2017, with composite returns on the emerging markets closed-end funds at 6.1 per cent, compared with that of the MSCI emerging market index at 7.4 per cent. Some of this was attributable to being underweight in the technology sector, which now accounts for over a quarter of the emerging markets universe.

City of London has weathered the changes introduced by the Markets in Financial Instruments Directive (MifidII), as research is carried out in-house, whereas other fund managers have been charging clients to fund outsourced research.

CITY OF LONDON INVESTMENT GROUP (CLIG) 
ORD PRICE:421pMARKET VALUE:£113m
TOUCH:416-435p12-MONTH HIGH:448pLOW: 360p
DIVIDEND YIELD:6.2%PE RATIO:11
NET ASSET VALUE:72pNET CASH:£15.6m
Half-year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201615.45.817.58.0
201717.16.620.09.0
% change+11+13+14+13
Ex-div:1 Mar   
Payment:16 Mar