DIY Investor Magazine
/
December 2015
8
Job Curtis
Manager
THREE REASONS TO CONSIDER
THE CITY OF LONDON INVESTMENT TRUST
AN INVESTMENT TRUST ADVANTAGE
One of the Trust’s strategic aims is to provide a
growing stream of income for its investors by investing
in companies that are well financed, offer a strong
competitive advantage and demonstrate a history of
stable cash-flows and rising dividends.
The investment trust structure helps to achieve this aim:
unlike open-ended vehicles which must pay out all of
the income they receive from underlying holdings, a
UK-domiciled investment trust is permitted to retain up
to 15% of its annual income and pay it into a reserve
account. It means that during more plentiful years a
small percentage of the dividend payments can be put
aside, so that during lacklustre years, for example in an
economic downturn, the fund manager is able to use
the reserve to top-up the dividend it pays investors and
smooth the income stream over time. While not a guide
to the future, this has enabled City of London to grow its
dividend every year since 1966 - the longest record of
any investment trust!
Job Curtis has been managing the Trust since 1991.
A GOOD INVESTMENT FOR THE LONG TERM?
We believe investing over the longer term serves to
mitigate some of the short-term risks and volatility
inherent in equity markets, and can maximise your
potential returns. The City of London Investment
Trust aims to unlock value in equities on a medium to
long-term basis, and may be of interest to investors
looking to gain UK stock market exposure through a
broad, conservatively managed portfolio of blue-chip
investments. Looking back over the past 50 years,
short term investors may have been unnerved by any
number of macroeconomic events: the 73/74 bear
market, the winter of discontent, severe unemployment,
interest rates hikes to 15%, ‘Black Monday’, ‘Black
Wednesday’, The Asian Financial Crisis, the dotcom
crash, or the Global Financial Crisis; all potentially
leading to performance damaging withdrawals in
the process. The chart below demonstrates the
performance of £100 invested 50 years ago in various
assets, including The City of London, and run through
to the present day.
Source: Henderson Global Investors, Barclays; as of July 2015. Top to
bottom: Barclays Equity Index Total Return; Gilt Total Return (UK government
bonds); the Retail Prices Index (a measure of inflation); and City of London
Total Return.
