F&C Investment Trust 12 December 2024

F&C Investment Trust (FCIT) aims to provide a diversified one-stop portfolio across geographies, sectors, and investment styles, without over-relying on any single return driver. This strategy has delivered strong year-to-date Performance (to 30/11/2024), with returns ahead of the FTSE All-World Index despite market concentration and outperforming most of its AIC Global sector peers.

Paul Niven has managed the trust since 2014, overseeing both strategic and tactical asset allocation, while stock selection is delegated to fund managers operating under bespoke segregated mandates. Leveraging Columbia Threadneedle Investments’ extensive resources, most of these managers are in-house, although Paul can appoint external managers if he believes they can deliver returns that justify the additional costs. This open-architecture approach, combined with FCIT’s large scale, contributes to the trust having one of the lowest ongoing Charges in the AIC Global sector, at 0.49% (as of 31/12/2023).

Currently, Paul is maintaining a balanced approach between growth and value factors, without making a definitive call on whether US large-cap growth stocks will continue to drive market returns. As a result, recent Portfolio changes have been more focussed on reallocating strategies rather than making tactical adjustments to market factors, sectors, or geographies.

FCIT offers a prospective yield of c. 1.3%, with the board expecting earnings to cover the full-year Dividend for the financial year 2024. One of FCIT’s aims is to provide a rising income stream, and the trust boasts a 53-year track record of consecutive annual dividend increases. Gearing stands at 4.5% (with debt at fair value), with a blended fixed interest of c. 2.4% and maturities ranging from 2026 to 2061. The trust is currently trading at a Discount of c. 7%.

In our view, FCIT is an attractive proposition for investors seeking a well-diversified, one-stop solution for growth assets. Given the difficulty of predicting macroeconomic trends, exemplified by the current uncertainties surrounding inflation and monetary policy, we believe FCIT’s diversification across investment styles, sectors, and geographies could be particularly appealing at this juncture.

Paul’s balanced portfolio is not excessively reliant on sectors that have performed well recently, namely technology. As a result, we believe FCIT could be suitable for investors seeking to balance risks by also maintaining exposure to parts of the market that have been less in favour. Additionally, FCIT’s exposure to private equity is a distinguishing feature, adding an extra layer of diversification and setting it apart from other ‘core’ solutions in the AIC Global sector, which typically focus on listed equities only.

Moreover, FCIT has a competitive advantage in terms of Gearing, as it benefits from lower-cost debt compared to many of its peers. This means that Paul may leverage his portfolio without being burdened by high interest costs, making the use of gearing more effective over the long term. We also believe FCIT's 53-year track record of annual Dividend increases strengthens the trust’s investment appeal. Given the trust’s substantial revenue and distributable capital reserves, we think the board is well-positioned to continue increasing dividends. Finally, the trust’s current Discount of c. 7% presents, in our opinion, an attractive entry point for long-term investors.