The 150-year-old investment trust that’s a best-seller | Fidelity UK (2024)

One investment trust that regularly appears in our list of best-sellers is the , which also happens to be the oldest such vehicle having been founded in 1868. Obviously a lot has changed in the intervening 156 years, yet its objective has stayed the same right from the outset.

F&C seeks to provide a reliable foundation that aims to deliver steady, long-term capital growth and a healthy dividend income. It does this by investing primarily in an internationally diversified portfolio that offers a core exposure to global equities.

Strategy and positioning

The £6bn investment trust employs a multi-manager strategy where the assets are divided between a range of different global and regional mandates, with each adopting their own individual approach. These carefully constructed portfolios create an opportunity for the fund to outperform, while diversifying the different sources of risk.

Fund manager Paul Niven actively adjusts the allocation to the various strategies according to his view of the markets. He will also replace any underperforming managers, with some of the assets run by colleagues at Columbia Threadneedle Investments and others by third-party specialists.

It’s an approach that provides exposure to most of the world’s stock markets, with the combined portfolio consisting of more than 400 different companies including private equity¹. At the end of March, the largest regional weightings were: the US 60.3%, Europe ex UK 10.7% and the UK 9.1%.

Outlook

Writing in the annual accounts at the end of December, Niven said that accelerating technological change and an increasing influence from artificial intelligence (AI) will create opportunities and risks, both in those companies which stand to directly benefit from these trends and for those which stand to be challenged.

“Our approach is well placed to identify and capture both the beneficiaries of these trends and those whose business prospects are underpriced, through our broad and deep consideration of investment opportunities from across the world.”

How has it performed?

Over the last 5 years the fund generated a net asset value (NAV) total return of 74.1%, which was marginally ahead of the 72.8% increase in its FTSE All-World benchmark. Unfortunately the share price return was a more modest 55.6% due to a widening of the discount².

How much income does it pay?

F&C is one of the Association of Investment Companies’ dividend heroes because it has successfully increased its annual distributions for 53 years in a row. Despite this, the shares only have a modest yield of 1.4%, which reflects the fund’s balanced approach that seeks to generate both income and capital growth.

Are the shares available at a discount?

Like many other investment trusts, F&C shares are trading below their NAV, even though there is an active buyback programme in operation. They are currently available at an 8% discount, which is broadly in line with the 12-month average of 9%.

How do the costs stack up?

It is good to see that the tiered management fee was reduced from the start of January 2023 and as a result, the ongoing charges have fallen to 0.49%. This appears to be good value, especially in view of the double layer of costs arising from the multi-manager structure.

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Past performance is not a reliable indicator of future returns.

Source: Morningstar, share price total returns from 14.5.19 to 14.5.24. Excludes initial charge.
¹ The private equity allocation at 31 December 2023 was 11.3%, according to the annual accounts.
² Lipper and Columbia Threadneedle Investments, data to 31 March 2024