City of London Investment Group Q3 update, FUM rises 5.5% (LON:CLIG)

City of London Investment Group plc (LON:CLIG) is the topic of conversation when Hardman & Co’s Financial Analyst Dr Brian Moretta caught up with DirectorsTalk for an exclusive interview.

Q1: City of London Investment Group recently announced its third quarter Funds under Management update, what were the main features?

A1: It was a positive quarter for the company, with funds under management rising 5.5% to $10.1 billion. The largest contributor was a healthy market backdrop, with the MSCI Emerging Markets total return Index up 2.1% over the quarter and the MSCI All World ex US Index increasing 4.5%.

Q2: How about marketing and inflows?

A2: It is almost a year since the group expressed an intention to invest in more marketing and the benefits of that seem to be appearing.

It had its best quarter for net inflows for some time, with $224m of new assets. Of particular note was the $54 million of net inflows into the Karpus business. This has been an area of concern and this is, by far, its strongest quarter since it joined the group.

The positive result is particularly noteworthy given the net outflows to the group in the first half of its financial year.

Q3: How was fund performance?

A3: Over a quarter, we might expect to see some variability in performance. The Emerging Markets and Fixed Income strategies outperformed, while International and Opportunistic Value underperformed.

As we have noted in recent reports, the discounts on closed-end funds are very wide just now. For example, the Municipal Bond strategy currently has average discounts of just over 10%, while the long-term average is 3.4%. Their investment team is finding lots of opportunities and the flows suggest this may also be starting to resonate with investors.

Q4: How about financial results?

A4: There was little incremental news on financial results, other than the reiteration that City of London Investment Group expects to make cost savings of $2.5 million in the next financial year.

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