City of London (CoL) is an active emerging markets equity manager. Our investment philosophy is value orientated. We seek to provide long term capital growth via active Country Allocation and Stock Selection in emerging markets. Our key objective is to provide above average, long-term outperformance versus the appropriate funds' emerging market benchmark. Our aim is to provide this outperformance with a significantly lower level of risk than the benchmark index and our peer group. This is effected by the choice of closed-end funds as our prime investment medium. Implementation of our disciplined investment process is characterised as a top-down approach to country allocation overlaid with a pure value approach to stock selection.
It should be emphasized that CoL's investment strategy differs from that of a traditional manager, in that we capitalize on the very real and identifiable inefficiencies closed-end funds offer.
A closed-end fund has a fixed capital structure, which is comprised of shares that are listed and traded on a stock exchange via a stock broker. These shares trade at whatever value the stock market puts on them. In effect, a closed-end fund trades at a price that reflects demand. Demand or the lack of it is reflected in shares trading at a premium or a discount to Net Asset Value (NAV). Our excess return, or alpha, is generated by purchasing closed-end funds at a discount to NAV. Further benefits of closed-end funds include lower transaction costs and more flexible and faster asset allocation and access to some markets that are effectively closed to direct investment, thus offering greater diversification.