(Alliance News) - City of London Investment Trust PLC said Friday it underperformed its benchmark in the first half of its financial year, blaming the underperformance on negative stock selection.
For the six months ended December 31, the investment trust's net asset value total return was 6.9%, compared to the FTSE All-Share Index which returned 9.3%.
City of London Investment's net asset value per share as at December 31 was 357.4 pence, up from 344.0p at the end of June.
The trust's share price at the end of December was 370.5p, reflecting a 3.7% premium to net asset value. The stock was trading 0.4% higher at 359.00p each on Friday morning in London.
City of London said the UK equity market fell slightly over the first four months of the fist half, with the outlook uncertain for many companies due to the Covid-19 pandemic. However, a rally took place in the final two months on positive vaccine news.
The company blamed its performance on negative stock selection, noting the biggest detractor was not holding equity investment instruments - especially Scottish Mortgage Investment Trust PLC - followed by being underweight in travel & leisure, including not holding Flutter Entertainment PLC.
It noted it was also hurt by its above-average exposure to gas, water & multi-utilities. In addition, some of its portfolio's more defensive holdings were underperformers, such as food manufacturer Nestle SA, US telecommunications operator Verizon Communications Inc and business publisher & events firm RELX PLC.
Looking ahead, Chair Laurie Magnus said: "The roll-out of three vaccines against the Covid-19 virus is very encouraging and provides "light at the end of the tunnel". It is unlikely, however, that there will be a smooth path to herd immunity for the UK or globally given current limitations to the supply of the vaccines and the apparent scope for the virus to mutate.
Governments and central banks have responded to the enforced lockdowns of economies as a result of Covid-19 with unprecedented fiscal and monetary easing. It is likely that, after a contraction in the first quarter of 2021, the UK and global economy will recover sharply over the rest of the year, with consumer demand bolstered by running down the high savings ratios accumulated while economic activity was restricted."
Turning to dividends, City of London said it expects to be able to increase the payout after having declared two interim dividends of 4.75p each during its financial year, noting the quarterly rate will be reviewed before the third interim dividend is declared in March.
By Ife Taiwo; ifetaiwo@alliancenews.com
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City Of London Investment (CTY)