F&C investment trust: Low cost steady performer
The £1.9bn granddaddy of the investment trust world; the Foreign & Colonial Investment Trust, is a slow but steady low cost investment
Foreign & Colonial Investment Trust, the £1.9bn granddaddy of the investment trust world (it was the first, founded in 1868) is in fine shape and performing well.
That will be the message delivered to the trust's annual meeting on Thursday by portfolio manager Jeremy Tigue. 'I enjoy meeting shareholders on what is usually a sociable occasion,' he says.
More than 100,000 individuals hold shares in the trust. Most will be happy with its recent performance.
›› More: F&C Investment Trust
The fund, which entered the financial crisis with a large exposure to private equity firms – typically smaller companies not quoted on the world's major exchanges – suffered in 2009 as uncertainty clenched markets.
But confidence has recovered over the past year and these stakes have been repriced.
'During the intense periods of the crisis, our private equity exposure caused anxiety,' Tigue says. 'But these holdings will continue to be more highly valued during the rest of this year.'
However, he wants those holdings to shrink from 16% of the trust's assets to nearer 10%.
F&C uses as its benchmark a mix of the FTSE All-Share Index (40%) and the FTSE All-World Index (60%).
Over most periods it has managed to beat this. But it is not an ideal yardstick, as F&C's holdings do not accurately mirror the split.
Pitted against a wider range of globally invested rival trusts, F&C's performance is more pedestrian, especially over longer periods. But the fund has advantages.
›› F&C Investment Trust: Latest charts, portfolio spread, discount
Its costs are low and may fall even lower. The annual fee structure has recently been simplified with the scrapping of a performance-related element.
The fee paid to separate asset manager F&C, for whom Tigue works, is now calculated as a straight 0.365 per cent of the trust's total share capital.
This would mean a reduction against last year's fee. The trust, unlike rival Alliance, which is mired in controversy, applies a strict 'discount control mechanism'.
This means that its share price is never likely to fall to less than 90% of the value of the underlying assets.
At Alliance, where no such mechanism exists, shares have recently fallen to 80% of the underlying asset value. This is galling for investors who bought their shares at a lesser discount.
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