No. of Recommendations: 16
City of London Investment Group (CLIG) is a boutique investment house with a specialism in emerging markets.

I've invested in it for 3-4 years, adding and sometimes greatly reducing my stake in response to the waxing and waning of all things emerging. (I try to wax when it wanes, and vice-versa, naturally!)

There was an excellent recap from Burgdorf a week or two ago, and a subsequent update, so fortunately I can link to that to afford you the details:

The bull case for me is a low-ish multiple, very high dividend yield (8%), net cash, experienced and neatly incentivised management, and last time I looked I thought it was pretty cheaply rated versus funds under management versus the likes of Aberdeen and Jupiter.

The bear case is that FUM have been declining, due to a wicked triple whammy of falling markets, underperformance of its own funds, and as Burgdorf noted a big client loss towards the end of 2012.

As of this writing two of these have reversed -- EMs are popular again, and CLIG's funds are very *very* slightly edging ahead. Its strategy is to invest in discounted closed-end funds, so further popularity in EMs might be expected to further narrow discounts and thus help its comparison figures, but it hasn't always worked like that. Over the very long-term its beaten its benchmarks, but the past 5 years or so haven't been so good, though not catastrophic either.

There's no sign yet of much inflow from new clients, however, which is a concern.

To be honest I think the past 1-2 years has exposed CLIG as a bit of an EM proxy (as opposed to a growth story like Jupiter, say) but that's tolerable to me given I'm getting paid an 8% yield versus the typical low/no yield EM fund options.

As for choosing it for the competition, emerging markets had been in the dumpster for a couple of years, and readers were no longer appending "why are you investing in the US/UK -- I am putting all my money in the countries of tomorrow, China, India etc!!!?" or some other charmingly enthusiastic rampantly bullish pitch for EMs at the end of every other article I wrote...

So perhaps out-of-fashion and due a revival. (In most cases (e.g. Brazil and China) valuations had come down markedly, too).

I wouldn't have thought it's got the metrics to win the competition -- it's not going to triple like some warrant or tinpot oil share -- but for me it's a very investable option.

Flaneur (Long CLIG)
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