# City of London Investment Group Plc Solid FUM update offset by margin changes

- Link: https://www.directorstalkinterviews.com/city-of-london-investment-group-plc-solid-fum-update-offset-by-margin-changes/412759719
- Published: 2018-10-09T15:07:47+01:00
- Author: Charlotte Edwards

**[⌊Hardman & Co Report Report Downloads⌉⌊Hardman & Co Report Report Downloads⌉[City of London
Investment Group Plc** (LON:CLIG) has released its trading update for 1Q of FY’19.
The statement
 shows a continuation of the trends seen in recent statements. Aggregate
inflows into the newer strategies were largely offset by rebalancing outflows from
the Emerging Markets strategy, resulting in a small amount of net inflows of $8m.
Market movements were mixed, with only developed markets rising during the quarter
and MSCI EM index declining 1%. Fund performance was slightly behind benchmarks,
with manager performance and widening discounts hampering different strategies. 
In aggregate, FUM declined slightly from $5.11bn to $5.01bn.

► **Operations**: The changing mix of the assets continues to affect the revenue

margin. Both Developed Markets and Opportunistic Value are lower margin than the
existing Emerging Market business. Their rising proportion led to a decline in revenue
margin to 77bps, from the 80bps previously indicated.

► **Costs**: The costs were largely in line with those indicated at the time of 
the fullyear
 results. The EIP charge has increased a little, to 4% from the 3% 
at the fullyear results. Estimated earnings for the first quarter will be £2.2m,
down from the previous year’s figure of £2.5m.

► **Valuation**: The prospective P/E of 11.2x is at a significant discount to the
peer
 group. The historical yield of 6.8% is attractive and should, at the very 
least, provide support for the shares in the current markets. ► Risks: Although 
emerging markets can be volatile, City of London has proved to be more robust than
some other EM fund managers, aided by its good performance and strong client servicing.
Further EM volatility could increase the risk of such outflows, although increased
diversification is also mitigating this.

►** Investment summar**y: Having shown robust performance in challenging market

conditions, City of London Investment Group is now reaping the benefits in a more
supportive environment. The valuation remains reasonable. FY’17 and FY’18 both saw
dividend increases and, unless there is significant market disruption, more should
follow in the next few years.

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