Interview: Job Curtis, manager of City of London Investment Trust
What is the City of London Investment Trust?
The fund invests to provide income and growth. Income is paid to shareholders in the form of dividends; this is a bit like interest paid by banks, although what you get depends on the profit the company makes. We have grown the dividend every year over the past 50 years, which is a record among investment trusts. Growth, meanwhile, comes from the company’s share price growing.
City of London Trust: Key stats
Net assets: £1,249 million* Ongoing charges figure: 0.42%
Number of holdings: 117
*Morningstar on 4 August 2016. Other figures taken from the June 2016 fact sheet.
Do you invest in the fund yourself?
I have two big holdings; Henderson shares through my company scheme [Henderson manages the trust] and the City of London Investment Trust. I had 107,395 shares in the fund in the trust’s last financial year.
What companies have you recently bought?
I’ve bought Inchcape – a global motor retailing company. It is in the FTSE 250 and got dragged down after Brexit so I got it at quite a good price. I’ve also added to our holding in property developer Berkeley Group, as while it was hit hard following Brexit, it has a few riverside developments planned and has a deal with National Grid to redevelop old gas holders into flats. It’s also yielding 8%.
What companies have you sold recently?
In June, I sold Premier Farnell – a distributor of electronic components – it hadn’t been performing well, so when a takeover bid for the company came along it seemed to be a good ‘get out of jail card’.
Has there been a Brexit impact on the fund?
The fund isn’t particularly exposed to the UK domestic market, so there hasn’t been too much of an impact following Brexit. Global companies in the fund will also benefit, as the worth of their business in sterling will improve ￼￼￼￼￼￼￼due to the pound falling against the dollar and the euro.
How do you protect the fund from market falls?
One saying is that the market is like a manic-depressive; one day it’s incredibly excited and the next it isn’t. So you do need to be able to stand back from the noise.
The market is governed by fear and greed, but you’ve got to balance those emotions. In fact, the world’s greatest investor, Warren Buffet, said that the time to be greedy is when others are fearful and vice versa.
What’s the best company you’ve ever bought?
You often find good companies in surprising places. The best company I’ve bought is British American Tobacco. You wouldn’t think it would do well given smoking is in decline, but during the technology bubble in January 2000, the share price got down to below £3, and it’s now about £48. So it’s a phenomenal stock and it’s paid very good dividends throughout too.
However, I would strongly urge investors to build up a diverse portfolio. To bet it all on one horse is a huge mistake.
What was your worst investment?
The one that was particularly annoying was Lloyds Banking Group. I’d held the company for a while, but then in the run-up to the financial crisis it bought HBOS and almost bankrupted itself, so I sold my holdings. However, about a year ago I bought back into it, as now its balance sheet is strong and it’s started paying dividends again.
What’s your top tip for investors?
If you’re investing in the stock market without an adviser, I’d recommend a lot of reading first as you are dealing with your savings. People need to be aware of the risks as well as the returns.
The man behind the fund
Name: Job Curtis (Job is pronounced in the same way as the word ‘probe’).
Managed the fund since: 1991
Background: Graduated from Oxford in 1983 with a degree in PPE (Politics, Philosophy and Economics). Then went to work as a graduate trainee for a stockbroking firm, before moving to Cornhill insurance, and then to Touche Remnant. It was here Job began managing the City of London Trust aged 30. The company was taken over by Henderson in 1992.
Interview conducted on 22 July 2016.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.