Steady evolution: F&C Investment Trust

F&C Investment Trust has been in business for over 150 years. When it launched in 1868, it was the world’s first collective investment fund. Today, it is the longest-established investment vehicle of its kind.

Steady evolution: F&C Investment Trust

F&C Investment Trust has been in business for over 150 years. When it launched in 1868, it was the world’s first collective investment fund. Today, it is the longest-established investment vehicle of its kind.

F&C Investment Trust has been in business for over 150 years. When it launched in 1868, it was the world’s first collective investment fund. Today, it is the longest-established investment vehicle of its kind.

The purpose of this pioneering fund was “to give the investor of moderate means the same advantages as the larger capitalists in diminishing the risk by spreading the investment over a number of stocks”. In other words, it was designed to allow ordinary people to invest their savings in a broad range of assets – thus reducing risk in the process.

Today, the Trust continues to offer its investors an investment approach that is based on diversification: between countries, sectors and types of company – from well-established businesses to up-and-coming innovators.

Moving with the times

F&C Investment Trust was explicitly designed to invest overseas. In the late 19th century, it invested heavily in the government bonds of what we would today call “emerging markets”, including Egypt, Turkey and Brazil. Later, it invested in mortgage bonds issued by railroad companies in the US.

In 1925, F&C Investment Trust began investing in the stock market. Today, the Company invests predominantly in equities. Paul Niven, the Trust’s fund manager, characterises its development as moving “from literally investing in the Amazon to buying Amazon.com”.

Diminishing risk through diversification

In the 21st century, the Trust has continued to evolve by making investments in private equity as well as in publicly listed stocks. This began in 2003, when 5% of the Company’s assets were allocated to private equity, and has steadily increased since. Today, private equity makes up around 12% of F&C’s assets under management, providing a valuable element of diversification.

F&C achieves its exposure to private equity by investing in funds rather than directly in private companies. This adds an additional layer of diversification because the Company’s private-equity exposure is spread over many different companies rather than being concentrated in a few, as would be the case with direct investments.

A renewed focus on foreign markets

Until the fairly recent past, much of F&C Investment Trust’s equity investments were in UK-listed companies. Since 2013, however, the Company has renewed its original overseas focus, including investments in emerging markets such as China and Mexico. It currently has just 10% of its investments in the UK. This means that it is not tied to the fortunes of any one investment market; indeed, since it took a much more global approach over a decade ago, it has benefited by having relatively little exposure to an underperforming UK market.

F&C Investment Trust also makes use of borrowing, or “gearing”, to enhance its returns. The risks involved in this are carefully controlled. Although the Company is permitted to borrow up to 20% of its net asset value, gearing rarely exceeds 10%.

To reduce the risk of losses caused by unfavourable foreign-exchange movements, the Company can make use of currency hedging. The manager employs this only occasionally and selectively, but it offers an additional means of controlling the risks associated with overseas investments. 

Steady growth and dependable dividends

But although F&C investment strategy has evolved over the decades, its core approach has been consistent: steady, long-term capital returns and a growing and sustainable dividend. F&C has raised its dividend every year since 1971.

F&C’s management shows a similar steadiness. Since its launch in 1868, the Company has had only 11 fund managers – a remarkable statistic given a history that extends over three different centuries. Over the past 55 years, the Company has had just three fund managers, and the current fund manager, Paul Niven, has been in place since 2014.

A flexible and high-conviction approach

F&C’s investment approach is flexible, so the fund manager can take a genuinely high-conviction approach: investing in only those stocks that meet the strategy’s investment criteria. Although the FTSE All-World TR index is used as a reference benchmark to assess performance, F&C has no sector or country limits.

Currently, F&C has around 400 holdings. This high level of diversification means that any stock-specific risk can have only a very minor effect on the overall portfolio. And because the investments are spread over a broad range of countries and sectors, investors should be protected from the wildest swings of the stock markets.

The largest and longest-established UK investment trust - with a strong record of performance

At present, F&C Investment Trust has over £6 billion in net assets under. The Trust is a constituent of the FTSE 100 index of the UK’s largest companies. Its scale is testament to its longevity – and to its strong performance. F&C has outperformed the FTSE All-World TR index over one, three and five years.

Find out more about F&C Investment Trust’s performance here.

28 January 25

Paul Niven

Fund Manager, F&C Investment Trust

investment risk

The value of your investments and any income from them can go down as well as up and you may not get back the original amount invested. Gearing is used for investment purposes to obtain, increase or reduce exposure to an asset, index or investment. The use of gearing can enhance returns to investors in a rising market, but if the market falls the losses may be greater.

Private Equity funds typically have high minimum investment levels and may restrict or suspend redemptions or repayments which can limit liquidity for investors.

Whilst diversification can help reduce risk, it does not guarantee protection from losses, especially in extreme market conditions.

There is no guarantee that dividends will continue to increase.

The mention of a company does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell or otherwise transact in the company.

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