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Trust Insider: what's pushed City of London into the £1bn trust elite?
by James Carthew on Aug 13, 2013 at 00:01
I noticed recently that City of London Investment trust, which has traded on a modest premium of about 3% for some time, is issuing extraordinary amounts of stock – more than £10 million worth in the past six weeks alone. This has propelled it into that small group of investment companies with gross assets in excess of £1 billion.
This is a real success story for the sector and, I hope, a sign of things to come as investors become more comfortable buying investment companies instead of open-ended funds.
City of London (CoL) is a stalwart of the industry. It can trace its roots back to 1891 and its chairman, Philip Remnant, is the son of a former AITC chairman who was also the Remnant in Touche Remnant (the former managers of CoL that Henderson acquired in 1992).
It has had the same manager for the past 22 years, Job Curtis, and it bills itself as ‘blue-chip income for conservative investors’. This might paint an image of dull respectability for some investors but the fund’s above-average yield and decent long-term performance record are attracting new shareholders in droves.
CoL has just declared its fourth interim dividend for its accounting year ended on 30 June 2013. This makes a total for the year of 14.3p, which means the yield now is 3.9%, about 10% more than the FTSE All-Share index.
CoL’s dividend yield is towards the top end of those generated by the rest of the group, ranking fourth behind Merchants , Murray Income and Dunedin Income & Growth (DIG, which I talked about a few weeks ago). CoL can also boast of having increased its dividend each year for the past 46 years, and by more than 75% over the past 10 years – a remarkable record.
CoL’s net asset value (NAV) performance has also been pretty good: over 10 years it is 32% ahead of the FTSE All-Share. However, CoL is up against some strong competition in the sector, so ranks sixth of 19 UK growth and income closed-end funds over that period (lagging the return on Temple Bar , Lowland , Finsbury Growth & Income and Perpetual Income & Growth by some margin and just falling behind Invesco Income & Growth ).
CoL is unlikely to lead performance tables now because, true to its billing, the portfolio is dominated by FTSE 100 stocks. It lags the competition in periods when small and mid-cap stocks are outperforming, as has been the case so far in 2013.
CoL’s record stacks up well against its open-ended competitors, good enough to put it into the first quartile in the UK equity income sector for more than 10 years, and its (recently amended) fees are very modest: 0.365% on net assets below £1 billion and 0.35% thereafter and no performance fee.
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