Disclaimer
This is a non-independent marketing communication commissioned by Columbia Threadneedle Investments. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
- F&C Investment Trust (FCIT) released its annual results for the year ending 31 December 2020. Over the 12-month period, the trust delivered NAV total returns of 12.3%, while in share price terms the trust returned 4.6%. This compares to its benchmark’s total return (FTSE All World Total Return Index) of 12.4%.
- Despite the pandemic severely impacting the dividends of many companies, FCIT has continued its exceptional track record of dividend growth, with this year’s dividend payment marking its 50th consecutive annual increase. Over the year the trust paid out dividends of 12.1p per share, an increase of 4.3%. The board used a portion of their revenue reserves to support the payment.
- The manager remains confident in the multi-manager approach and continues to develop the private equity component of the strategy. Recent changes include the introduction of Pyrford Global, a global equity manager, and the BMO Sustainable Opportunities strategy. The latter reflects FCIT’s commitment to ESG, with the board announcing their intention for the trust to be net carbon neutral by 2050.
Kepler view
F&C Investment Trust (FCIT) continues to offer a truly diversified global portfolio and remains an attractive ‘one-stop-shop’ portfolio for investors looking to have a well-managed and diversified portfolio, while retaining the benefits of active management. Paul Niven’s stewardship of the strategy, specifically his rotations into value and expanding private equity allocation, continue to add value to investors.
FCIT generated a NAV return of 12.3% over the year, in line with the benchmark return of 12.4%. Paul highlights that the performance within the portfolio was something of a barbell, given the differences in contribution from his exposures to growth and value themes. The biggest contributor over the year was FCIT’s US growth allocation, as would be expected. While its US growth manager, T Rowe price, underperformed its benchmark, Paul’s active overweight to US growth resulted in an overall positive contribution from the region, with the North America allocation returning 16.0%. He highlights that the one of the biggest detractors over the year was the zero position in Tesla, symptomatic of the extreme market dynamics we saw over 2020. Elsewhere FCIT’s global income, Japan, US value, and Europe managers all handily outperformed their benchmarks over the year. Paul does concede that his weightings to value and income strategies were an overall detractor to the trust despite successful stock selection, as global equity market were primarily driven by growth stocks over 2020.
We continue to be excited by the changes Paul is making to the trust; cognisant that multi-manager strategies, especially those with private equity positions, can take longer to make adjustments to than a conventional listed equity portfolio. Paul has begun to increase the concentration of the underlying investment strategies to focus the portfolio and extract greater alpha. He has also reduced FCIT’s allocation to global income, US growth, Japan and European allocations, correspondingly increasing his allocation to US value, Emerging markets and small caps, which should better position the trust as we move into a post-pandemic recovery.
FCIT’s private equity investments, a key differentiator of the trust, generated good returns of 13.6% over the year. The standout performer was Syncona, the healthcare focused private equity fund, which generated returns of 19.2%. Paul has committed $180m to Pantheon during 2020, a private equity fund of funds, investing in a bespoke programme of future growth opportunities that will allow FCIT to access the leading growth and venture capital funds; private equity strategies that are amongst the hardest to access given their strong performance and sometimes limited capacity.
2020 was the 50th year of consecutive dividend increases for FCIT, firmly cementing it as one of the AIC’s dividend heroes. Despite the impact of COVID-19 FCIT managed to grow its dividend by 4.3% over the year, with a total dividend of 12.1p per share for the 2020 financial year. This dividend was not fully covered by the trust’s revenue over the year, due to the impact of COVID-19, and the board used revenue reserves to support this dividend.
ESG has become an increasingly important part of FCIT. While the board has expanded FCIT’s ESG reporting, there have been some key changes to the operations of the trust. The most significant is the introduction of the BMO Sustainable Opportunities strategy, with a c.10% allocation. Not explicitly part of board’s ESG initiatives, the investment represents Paul’s acknowledgment of the investment opportunities presented by sustainability, and will clearly improve the overall sustainability rating of the trust. Other changes include the commitment to be net carbon-zero by 2050 latest (based on the emissions of the underlying portfolio) and BMO taking full ownership of the voting rights for all its underlying holdings.
Over the year, FCIT saw its OCF decline to 0.59%, a result of its revised fee arrangements. Despite this FCIT now trades at a 7.1% discount having traded at a premium earlier in the year. As Paul continues to evolve the trust, and the board continues its buyback policy, we feel there is potential for FCIT to return to its prior premium.
Kepler Trust Intelligence provides research and information for professional and private investors. In order to ensure that we provide you with the right kind of content, and to ensure that the content we provide is compliant, you need to tell us what type of investor you are.
Continue
