F&C Investment Trust (FCIT) offers investors a well-diversified equity strategy, combining multiple different listed investment strategies and private equity holdings into a single portfolio. Its ongoing allocation and stewardship is the responsibility of its portfolio manager, Paul Niven. FCIT is one of the more distinguished trusts within the AIC universe, as it is the oldest continually operating investment trust and has celebrated its 50th year of continuous dividend growth, having grown its dividend by 4.3% over 2020.
FCIT’s strategies are predominantly run in-house by BMO Global Asset Management, given the natural synergies that arise; however, it retains a number of external managers Paul believes are best-in-class. One of the more defining features of FCIT is its dedicated allocation to private equity, which Paul has continued to develop during his tenure, with additional new capital having been committed over 2020. ESG has also become increasingly important to FCIT, with adjustment having been made to its portfolio to accommodate this; we detail all the major changes Paul has recently made in the Portfolio section.
Paul continues to deliver strong performance figures, while simultaneously fulfilling the trust’s dual mandate of both income and capital growth. Since taking over the trust Paul has delivered returns marginally ahead of global equities, with his stewardship of the trust having been particularly impactful during the pandemic. We outline both the long-term performance of the trust and the contributions of individual strategies in the Performance section. Despite the competitive performance and illustrious dividend history, FCIT currently trades at a discount, whereas in the years prior to COVID-19 it had largely traded at a slight premium.
We believe that FCIT continues to offer investors a ‘one-stop shop’ solution to global equity investing. This is not simply the result of its competitive long-term performance and strong dividend history, but also through the active stewardship lead manager Paul Niven provides. The nature of his oversight can give investors confidence that FCIT is unlikely to be overexposed to a single factor or style, remaining a balanced approach to equity investing regardless of prevailing market conditions.
Paul’s stewardship continues to add value to FCIT, beyond simply fulfilling its objectives of capital and income growth. He continues to make FCIT a more unique offering within the global equity space, thanks to increasingly utilising private equity strategies and his recent inclusion of a sustainable equity allocation. We view the latter, along with a commitment to net zero carbon and other progressive policies, as clear evidence of the board’s increasing dedication to ESG integration, which we believe places FCIT on a trajectory towards improving ESG credentials further relative to its peers.
As we come out of the pandemic and the momentum behind the associated factors dissipates (be it for the ‘COVID-19 winners’ or the vaccine recovery trade), a more balanced approach may become more prudent. Economic normalisation may prevent any one style of investing returning to the forefront as it did over the last 12 months, rewarding investors like Paul who value a diversified yet market-aware approach to investing.
|Well-diversified portfolio which combines listed and unlisted equity
||May underperform during momentum- or narrowly driven markets
|Clear commitment to ESG and the improvement of its integration
||Unable to fine-tune or quickly adjust the portfolio as fast as a conventional listed equity strategy can
|Post-pandemic discount is an attractive entry point
||Gearing can amplify losses on the downside