Shares digital

A prudent City of London outperforms

by Simon Keane

Barry Olliff, chief executive and founder of City of London Investment Group, has made his fifth purchase in the company (excluding exercised options) over the past six months, picking up 312,275 shares last week at 335p.

US-based Olliff is known to keep a keen eye on costs and runs his office out of an industrial estate in Coatesville, Pennsylvania. Generally possessing large fixed costs, falling markets have concentrated minds on the asset managers’ cost lines.

Against an industry backdrop of falling assets under management (AUM) and earnings downgrades, Olliff has presided over steady AUM and earnings upgrades (house broker Landsbanki upped its 2008 EPS forecast by 8% following the 10 March Q3 update).

Currently trading at 338.5p, shares in City of London have held up well since last summer. The company runs institutional emerging markets funds. The investment process involves buying shares in closed-end funds.

In keeping with his style, Olliff takes a value approach only buying into trusts whose shares are on a discount to net assets. While Olliff was unavailable to comment, Landsbanki’s Samir Shah says the old City hand is particularly excited at present by some cheap assets picked up in Saudi Arabia.

Olliff is City of London’s biggest investor. He helped buy out previous shareholder FMH Investments, a private middle east investor, in February so last week’s move, which leaves Olliff with 19.3% of the shares, should be seen in context of earlier buys.

Having initially held up well during the recent stock market turbulence, emerging markets have also come off. Despite this, City of London, managed to report no decline in AUM over its third quarter to the end of February. This means either the company continued to attract new funds or its existing funds massively outperformed the market. Good performance and tight cost control also meant margins came in better than Landsbanki expected.