In November, the UK equity market produced a total return of 2.2%, as measured by the FTSE All Share Index. The FTSE 250 Index of medium-sized companies, which is more focussed on the domestic economy, outperformed with a total return of 4.1%. The FTSE 100 Index of the largest companies, which has a greater proportion of sales from overseas, produced a total return of 1.8%.

City of London’s best performing stock over the month was Whitbread, which is now focussed on its Premier Inn budget hotel chain and its pub restaurants, having sold Costa Coffee to Coca Cola. A notable underperformer from City of London’s portfolio was Hiscox, the insurance company, where there was a profits downgrade. Long term, Hiscox has been a very successful holding and, in our view, it will grow faster than peers going forward. A new holding was bought in La Francaise des Jeux, which has a 25% exclusive license to operate lottery and offline sports betting in France. The company has a strong balance sheet, stable earnings and, in our view, good dividend growth prospects.

The general election result with a decisive victory for the Conservatives removes the risk of the Labour Party enacting its anti-business manifesto. UK equities have the potential to recover some performance relative to overseas markets and continue to offer an attractive yield compared with the main alternatives.

Glossary

Yield: The level of income on a security, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.