City of London trust maintains share price premium despite underperforming UK market
CTY’s premium grew from 2.5% in 2022 to 3.1% during the reported period.
According to the £2bn trust's annual results, net asset value total returns stood at 4.5%, trailing behind the FTSE All Share index's total return of 7.9%, with stock selection cited as the primary driver of underperformance.
CTY's premium grew from 2.5% in 2022 to 3.1% during the reported period, although it has reduced to 0.5% at the time of writing, according to data from the Association of Investment Companies.
City of London is part of a small cohort of investment trusts in the AIC UK Equity Income sector trading at a premium, which also includes Chelverton UK Dividend, Law Debenture and Merchants. The average discount for the sector is 4.1%.
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The trust's NAV total return has exceeded the FTSE All-Share index over three, five and ten years. The trust increased its dividend for the 57th year, with the revenue reserve increasing by £700,000 to £44.3m.
Direct Line Insurance was the largest detractor over the period, suffering from premium income trailing the rising cost of claims. House builder Persimmon also detracted on the back of a housing market slowdown, while building material firms CRH and Ashtead added to the hit.
The trust's underweight position in the travel and leisure sector, as well as its holding in Verizon Communications, were also notable detractors. By contrast, the portfolio's holdings in 3i and Munich Re were the biggest stock contributors due to growth in asset value and reinsurance rates, respectively.
Six new holdings were introduced during the reported period, including Glencore, along with three companies with cyclical elements but
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