LONDON, Feb. 25, 2025 /PRNewswire/ — City of London (LSE: CLIG) announces that it has today made available on its website, https://www.clig.com/, the Half Year Report and Financial Statements for the six months ended 31st December 2024.
The above document will be uploaded to the National Storage Mechanism, in accordance with UKLR 6.4.1R, and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
HALF YEAR SUMMARY
*This is an Alternative Performance Measure (APM). Please refer to the CEO review for more details on APMs.
For access to the full interim report, please follow the link below:
http://www.rns-pdf.londonstockexchange.com/rns/2739Y_2-2025-2-24.pdf
This release includes forward-looking statements, which may differ from actual results. Any forward-looking statements are based on certain factors and assumptions, which may prove incorrect, and are subject to risks, uncertainties and assumptions relating to future events, the Group’s operations, results of operations, growth strategy and liquidity.
Dividend
The Board declares an interim dividend of 11 pence per share, which will be paid on 3rd April 2025 to shareholders registered at the close of business on 7th March 2025 (2024: 11 pence).
Shareholders may choose to reinvest their dividends using the Company’s Dividend Reinvestment Plan, to do this please visit www.signalshares.com or if you hold your shares through a broker please contact them. The deadline to lodge your election is 14th March 2025.
The Board confirms the following interim dividend timetable:
• ex-dividend date:
6 March 2025
• dividend record date:
7 March 2025
• DRIP election date
14 March 2025
• dividend payment date:
3 April 2025
Dividend cover template
Please see dividend cover template attached here. http://www.rns-pdf.londonstockexchange.com/rns/2739Y_1-2025-2-24.pdf
The dividend cover template shows the quarterly estimated cost of dividend against actual post-tax profits for last year, the current six months and the assumed post-tax profit for the remainder of the current year and the next financial year based upon specified assumptions.
CHAIR’S STATEMENT
Introduction
CLIG is an investment-led organisation, focused on providing our teams with the resources they need to continue to provide strong long-term performance for our clients. Our investment teams produced good absolute and relative performance across most strategies in the period from 1st July 2024 to 31st December 2024 and for the full calendar year 2024, augmenting our long-term track records. Our business development team was active in increasing outreach to clients and prospects and launched an effort to enhance communications. Group management continue to look for ways to run the business more efficiently and are on track for reducing annualised costs.
Assets
Funds under management (FuM) averaged $10.3 billion in the period from 1st July 2024 to 31st December 2024, approximately 12% higher than the same period in 2023. This higher FuM level during the period improved cashflows and allowed CLIG to accumulate reserves and increase our dividend cover. Investment performance was good across almost all strategies, but net flows from 1st July 2024 through 31st December 2024 were negative. FuM were $9.9 billion at 31st December 2024, a decrease of c.3% as compared to $10.2 billion at 30th June 2024.
We were happy with asset growth progression over the past year, but witnessed several outflows as we approached year end. These coincided with talk of tariffs and trade wars as the prospect of a second Trump presidency was absorbed by markets. In the short term, this underpinned the US and sparked a sell-off in international and emerging markets. Contrast these fourth quarter performances: S&P 500 +2.4%, NASDAQ Composite +6.4%, MSCI World -0.27%, MSCI Emerging Markets -8.0% (source: Bloomberg).
For added perspective, consider the Group’s FuM growth over the past five and ten years from $3.9 billion as at 30th June 2014 to $5.4 billion at 30th June 2019 and $10.2 billion as at 30th June 2024. We are pleased with this healthy growth in assets. While this upward stair step pattern appears very orderly in hindsight, FuM volatility was a constant feature throughout the period – such is the nature of markets.
It is important to note that not only have FuM grown at CLIG, but the composition of funds managed has also changed meaningfully. Four factors have largely driven this change. First, the merger with Karpus Investment Management (KIM) in 2020 means that about 40% of Group assets are now being managed by KIM (out of that 65.5% in fixed income products and 34.5% in equities). Second, assets managed by our excellent International team have grown to 21% of Group FuM. Third, Emerging Markets, which have been out of favour for a protracted period, decreased to 35% from c.90% back in 2014. Lastly, our diversification assets, made up of a variety of strategies including Opportunistic Value (OV), Listed Private Equity (LPE), High Yield and Global are taking root and have grown to nearly 5% of Group FuM. For many years, your team at CLIG has worked diligently to manage the migration from a sole focus in EM to now having about two thirds of FuM outside EM. This dynamic transformation, organic and inorganic, improves the risk profile of the Group and opens up new avenues for growth and further diversification.
Performance
Several of our shareholders have asked for more information on performance, so I am taking this opportunity to go into some detail. Our OV team at CLIM delivered strong absolute returns and outperformed their indices by between 6% and 16%. Exceptional KIM performance deserves to be highlighted as well, particularly the team’s Taxable Fixed Income and Tax-Sensitive strategies, comprising c.26% of Group FuM. These products outperformed their indices by 6.2% and 7.7% in 2024, a staggering feat in fixed income. The vast majority of our CLIM and KIM-managed International mandates nicely outperformed their various indices by between 1% and 3%. Similarly, most of our EM mandates outperformed their indices in a range of 0.2% and 1.7%. And our LPE strategies performed strongly, with the composite delivering 20.9% on an absolute basis net of fees, outperforming their hurdle rate by 12.9% points.
ESG
Historically, we have secured renewable energy for our London and Rochester NY offices. It is heartening to know that this past year, the energy consumed by CLIM’s West Chester, Pennsylvania office came from renewable sources. This improvement began in February 2024 and is ongoing. You will find more detail in the CEO Review.
Business travel increased during the period with growth in our marketing efforts as the team met clients and prospects. To offset the impact of increased business travel, the Group will continue with its carbon offset programme.
All employees regularly receive a training programme directed towards diversity, equity and inclusion. To reinforce awareness of their role in protecting our network infrastructure, all employees receive monthly training on the critical issue of cybersecurity.
Alongside adherence to CLIG’s governance obligations at Board level, the Group is strongly committed to regular workforce engagement sessions to develop a closer relationship between employees and the Non-Executive Directors (NEDs). We encourage good relations between the NEDs and employees.
Your Board
Tom Griffith (CEO), Peter Roth (Senior Independent Director and Chairman of Audit and Risk Committee), Sarah Ing (Chair of Remuneration Committee) and I are the members of your Board of Directors. Our working relationship remains constructive and our focus continues to be on ensuring a stable and supportive environment for our teams and efficient management of the business for all stakeholders. We are in the late stages of recruiting another NED and look forward to providing you a timely update as we have it.
Dividends
Your Board is declaring an unchanged interim dividend of 11p per share. We continue to believe that the 1.2 times dividend cover policy based on a rolling five-year period provides a prudent template that serves to protect shareholders from volatility that can affect profits of asset management companies. The Board applies this policy using Underlying Profits†. The interim dividend will be paid on 3rd April 2025 to those shareholders registered at the close of business on 7th March 2025.
Shareholder engagement
During 2024, our executive team took a number of constructive steps to facilitate engagement with our existing and potential shareholders. Most recently in November 2024, our CEO, CFO and Head of Business Development hosted an effective meeting for hundreds of existing and prospective shareholders in CLIG. The session was on the Investor Meet Company platform and can be viewed by going to the Resources/Video Content section on our website www.clig.co.uk. Please take the time to watch as the team successfully conveys a number of important elements about CLIG.
Outlook
2024 was CLIG’s 33rd year in operation and its 18th year as a public company. We merged with KIM in October 2020, it having started in 1986. 2024 therefore marked its 38th year. Over this long span, the Group encountered all manner of markets, learning and adapting along the way. Predicting markets is like predicting the weather, but what we can look at and extrapolate from with some confidence is closed-end fund (CEF) discounts and these continue to be quite wide, providing attractive entry points. Please refer to Figure 4 on page 9 of the interim report within the CEO Review for a graph detailing investment trust discount levels since 1990.
Many markets outside the US have been under a cloud while the US has attracted huge interest and capital flows. It is not surprising, therefore, that we are hearing about attractive valuations and opportunities from our international and EM teams. In addition, our investment teams at CLIM and KIM continue to successfully engage in corporate governance initiatives, working with CEF Boards to narrow discounts. Our teams are active, highly focused and we remain constructive on the outlook for performance at CLIG.
Conclusion
CLIG continues to strive for excellence for all its stakeholders while exercising care and patience in managing the business. Management and your Board continue to look for ways to improve processes and efficiency at your Company. Investment performance for the rolling six months and the calendar year was strong in the large majority of the Group’s investment strategies. It is our performance record that will assist with client retention and in converting prospects into long-term supporters.
I would like to thank our teams for their continued fine work and all our stakeholders for their support. Thank you for your interest in City of London Investment Group.
Sincerely yours,
Rian Dartnell
Chair
24th February 2025
†This is an Alternative Performance Measure (APM). Please refer to CEO review for more details on APMs.
CHIEF EXECUTIVE OFFICER’S REVIEW
Monetary easing
In September 2024, the US Federal Reserve began to lower US interest rates by a larger than expected 50 basis points, followed in both November and December by 25 basis point cuts, reducing the Federal Funds rate to 4.25%-4.50% by year end. The theme of monetary easing is one that global capital markets have embraced, after eleven US rate hikes since March 2022, while the US dollar continues to trade strongly against most global currencies.
The Trump administration has threatened tariffs and other protectionist trade measures. Trading partners are eyeing the trade measures nervously, while international and emerging markets are hoping for a weaker US dollar which should increase demand for commodities, including oil, and boost foreign financial asset returns when converted to US dollars. After more than a decade of US exceptionalism in bond and equity markets, there might be a valuation opportunity for international and emerging markets to attract capital from US investors.
While threats of a full-blown trade war are being raised, the most likely scenario is for significant negotiation to take place among global trading partners and for “managed trade” to become the norm. If progress can also be made on ending the wars in Ukraine and the Middle East, expect financial markets to trade higher in 2025. The mid-January ceasefire in the Middle East can be viewed as a tentative start in terms of reducing tensions in the region.
FuM & flows
As shareholders will have seen from our interim trading update (announced on 20th January 2025) and the monthly release of data on our website www.clig.co.uk, Funds under Management (FuM) have decreased over the six months to the end of the calendar year (see Figure 1 below) due to net outflows, as shown in Figure 2 below.
The marketing team is focused on raising assets based on the good long-term performance of the Group’s investment management subsidiaries. Ten-year quartile charts of strategies managed by both operating subsidiaries are reflected in Figure 3 on page 8 of the interim report.
Client interest for our Listed Private Equity (LPE) strategy, managed by City of London Investment Management (CLIM) where an investment trust structure provides liquid access to private equity exposure with the transparency of regularly published net asset values, remains strong. We will split out the LPE strategy in our Q3 Trading Update and the FY 2025 Annual Report & Accounts, as LPE is a further avenue for diversification for the Group. Additionally, within CLIM, we had positive inflows in our Opportunistic Value strategy, as institutional clients are looking for specific tradeable opportunities that the team provides. Net outflows were seen in our two flagship strategies, Emerging Markets (EM) and International Equity (INTL), which is not surprising considering the increasing demand for US assets based on the outperformance of the US equity market and the strong dollar. At CLIM, the focus continues to be on ensuring that current clients are looked after from a performance perspective, so that when the overall environment turns towards non-US equity assets, our strategies retain their compelling long-term performance metrics.
As shown in Figure 3 on page 8 of the interim report, the Karpus Investment Management (KIM) team continues to outperform their peers over the ten-year period. KIM’s overall FuM increased over the six months due to outperformance of the underlying asset classes although net flows were negative as shown in Figure 2 below. Over the six months, we have continued to bolster the marketing and relationship management teams at KIM, in order to find new avenues for growth and clients.
Currently, for US retail investors, interest rates in fixed rate bank deposits or money market vehicles offered by financial institutions remain higher than in recent memory and are in competition to an active fixed income manager. KIM’s outflows during the six months fall into one of three primary categories: 1) the retail client base who are required to withdraw retirement assets by calendar year end due to US regulations, 2) high-net-worth clients with considerable wealth who withdrew assets to deploy capital for life events and/or business opportunities, and 3) institutional pension plan clients that were impacted by regulation changes which drove the outflows.
Figure 1. CLIG – FuM by line of business ($m)
CLIM
30 Jun 2021
30 Jun 2022
30 Jun 2023
30 Jun 2024
31 Dec 2024
$m
% of CLIM total
% of CLIM total*
$m
% of CLIM total
% of CLIG total
$m
% of CLIM total
% of CLIG total
$m
% of CLIM total
% of CLIG total
$m
% of CLIM total
% of CLIG total
Emerging Markets
5,393
72 %
47 %
3,703
64 %
40 %
3,580
61 %
38 %
3,568
56 %
35 %
3,471
58 %
35 %
International
1,880
25 %
17 %
1,812
32 %
20 %
1,983
34 %
21 %
2,394
38 %
23 %
2,091
35 %
21 %
Opportunistic Value
231
3 %
2 %
193
3 %
2 %
244
4 %
3 %
251
4 %
3 %
286
5 %
3 %
Frontier
13
0 %
0 %
9
0 %
0 %
9
0 %
0 %
10
0 %
0 %
11
0 %
0 %
Other/REIT
13
0 %
0 %
74
1 %
1 %
88
1 %
1 %
94
2 %
1 %
140
2 %
1 %
CLIM total
7,530
100 %
66 %
5,791
100 %
63 %
5,904
100 %
63 %
6,317
100 %
62 %
5,999
100 %
60 %
KIM
30 Jun 2021
30 Jun 2022
30 Jun 2023
30 Jun 2024
31 Dec 2024
$m
% of KIM total
% of KIM total*
$m
% of KIM total
% of CLIG total
$m
% of KIM total
% of CLIG total
$m
% of KIM total
% of CLIG total
$m
% of KIM total
% of CLIG total
Retail
2,804
72 %
24 %
2,419
70 %
26 %
2,441
69 %
26 %
2,655
68 %
26 %
2,760
70 %
28 %
Institutional
1,115
28 %
10 %
1,014
30 %
11 %
1,079
31 %
11 %
1,269
32 %
12 %
1,187
33 %
12 %
KIM total
3,919
100 %
34 %
3,433
100 %
37 %
3,520
100 %
37 %
3,924
100 %
38 %
3,947
100 %
40 %
CLIG total
11,449
100 %
9,224
100 %
9,424
100 %
10,241
100 %
9,946
100 %
Figure 2. Net investment flows ($’000)
CLIM
FYE Jun 2021
FYE Jun 2022
FYE Jun 2023
FYE Jun 2024
HYE Dec 2024
Emerging Markets
(275,493)
(315,770)
(205,924)
(424,101)
(157,416)
International
(14,145)
452,554
(50,824)
153,371
(332,208)
Opportunistic Value
(102,663)
617
34942
(33,237)
23,300
Frontier
(168,843)
(4,748)
–
–
–
Other/REIT
–
79,133
(5,709)
(12,290)
40,000
CLIM total
(561,144)
211,786
(227,515)
(316,257)
(426,324)
KIM
FYE Jun 2021*
FYE Jun 2022
FYE Jun 2023
FYE Jun 2024
HYE Dec 2024
Retail
(104,222)
(106,444)
(141,952)
(39,587)
(19,193)
Institutional
(130,911)
(3,302)
12,530
35,749
(118,257)
KIM total
(235,133)
(109,746)
(129,422)
(3,838)
(137,450)
CLIG total
(796,277)
102,040
(356,937)
(320,095)
(563,774)
* Includes net investment flows for Retail (24,407) and Institutional (20,264) pertaining to period before 1st October (pre-merger).
Value in closed-end funds
Our two operating subsidiaries continue to see value and opportunities in their various closed-end funds (CEFs) investment universes. Discounts in US-listed CEFs that invest in non-US equities remain wide due to the ongoing outperformance of assets offering US exposure, despite a strong year of relative and absolute performance. Discounts in UK-listed investment trusts also remain wide as the expansion of passive options in the UK marketplace provide competition to the c.150-year-old investment trust industry. Figure 4 on page 9 of the interim report provides a long-term view of the investment trust discount with the universe of investment trusts excluding 3i (blue line) remaining historically wide.
There are two positive outcomes we have seen over the past year: 1) an increase in corporate governance activity driven by CLIM and KIM as well as other investors, and 2) an increase in non-traditional offerings via investment trusts. The Association of Investment Companies (AIC) released findings that 25 years ago (1999), 88% of investment trusts were invested in equities. In 2024, that figure has fallen to 55%, as investment trusts are now deploying their capital in under-invested avenues, such as private credit, infrastructure, and property. These asset classes that need a longer-term time horizon are tailor-made for the investment trust structure, where the manager does not have to be concerned with managing daily cash flows or raising money for redemptions.
Financial results
Net fee income rose by 10% in the first six months of FY2025 to $35.3 million compared to the same period in FY2024 ($32.2 million) due to higher average FuM of $10.3 billion over the current period compared to $9.2 billion in the first six months of FY2024.
The Group’s profit before tax increased c.14% for the six months ended 31st December 2024 to $12.6 million as compared to $11.1 million for the six months ended 31st December 2023. Underlying profit before tax† for the six months ended 31st December 2024 was also higher by c.14% at $15.2 million as compared to $13.3 million for the six months ended 31st December 2023.
EPS for the six months ended 31st December 2024 increased by c.12% to 19.0¢ (14.7p†) per share from 16.9¢ (13.4p†) per share for the six months ended 31st December 2023. Underlying EPS† for the six months ended 31st December 2024 increased by c.12% to 22.9¢ (17.8p) per share from 20.4¢ (16.2p) per share for the six months ended 31st December 2023.
The Group’s fee income and the bulk of expenses are incurred in US dollars; however, c.32% of Group overheads are incurred in sterling that are subject to USD/GBP currency rate fluctuations. On average, US dollars weakened by c.2% against sterling to 1.287 for the six months ended 31st December 2024 from 1.256 for the six months ended 31st December 2023. The weaker US dollar meant that our sterling-denominated expenses cost more in dollar terms.
We continue to review expenses across the Group. Total administrative expenses for the six months ended 31st December 2024 were c.6% higher at $23.6 million as compared to $22.2 million for the six months ended 31st December 2023. The increase primarily relates to higher legal & professional fees, additional marketing resources, an increase in travel costs to meet clients and prospects, and the impact of US dollar weakening over costs denominated in sterling. From a cost reduction perspective, we are on track to reduce our costs by c.$3 million on an annualised basis.
Dividend cover chart
We have provided an illustrative framework on our website at https://clig.com/dividend-cover/ to enable interested parties to calculate our post-tax profits based upon some key assumptions. The dividend cover chart shows the quarterly estimated cost of a maintained dividend against actual post-tax profits for last year, the current year and the assumed post-tax profit for next financial year based upon assumptions included in the chart.
Alternative Performance Measures
The Directors use the following Alternative Performance Measures (APMs) to evaluate the performance of the Group as a whole:
Earnings per share in pence – Earnings per share in US dollars as per the income statement is converted to sterling using the average exchange rate for the period. Refer to note 6 in the interim financial statements.
Underlying profit before tax – Profit before tax, adjusted for gain/loss on investments and amortisation of intangibles. This provides a measure of the profitability of the Group for management’s decision-making.
Underlying earnings per share in pence – CLIG’s shares are quoted on the London Stock Exchange therefore the dividend is declared in sterling. Underlying profit before tax, adjusted for tax as per the income statement and the tax effect of adjustments, are divided by the weighted average number of shares in issue as at the period end. Underlying earnings per share is converted to sterling using the average exchange rate for the period. Refer to the reconciliation on note 6 in the financial statements.
Six months ended
31st Dec 2024
Six months ended
31st Dec 2023
Year ended
30th Jun 2024
$’000
$’000
$’000
Profit before tax
12,592
11,069
22,621
Add back/(deduct):
Gain on investments
(234)
(560)
(1,051)
