A world of experience
In a world where everything seems to be speeding up, sometimes a bit of history and long experience can help to bring perspective.
F&C Investments has more history than most
– it grew out of the world’s first investment
trust, Foreign & Colonial Investment Trust,
which was launched in 1868 and is still managed
by F&C today. In the intervening 143 years, the
company has expanded to include the venerable
Scottish investment trust house Ivory & Sime, and
more recently, London-based investment boutiques
REIT Asset Management and Thames River Capital.
The result of this long period of development
is a range of investment trusts that truly offers
something for almost every type of investor,
although the value of investments can fall as well
as rise and therefore risky assets are less suitable
for those with shorter time horizons. Of course,
different investors have different objectives and it
is often worth talking to a financial adviser to help
you discover which investments are best for you.Investments mainly targeting capital growth
Foreign & Colonial Investment Trust (FCIT), the oldest and one of the largest investment trusts in the Association of Investment Companies’ Global Growth sector, began life investing in government bonds in such far-flung locations as Brazil, Russia and New Zealand. Since the 1920s it has focused more on equity investment, and today combines a portfolio of listed equities in markets around the world (including a significant weighting in emerging markets) with a diversified allocation to private equity through funds of funds. A popular choice for investments for children (mainly via F&C’s Child Trust Fund and Children’s Investment Plan), FCIT has more than 80,000 shareholders, many of whom invest through F&C’s range of investment trust savings schemes.
Smaller company investment is often considered by growth-seekers, as companies at an earlier stage of development tend to able to expand more quickly (though there is also a greater risk of failure). F&C Global Smaller Companies offers access to an internationally diversified portfolio of small and growing companies, with UK, US and European portfolios managed by F&C’s in-house regional smaller companies specialists, and Japan and Rest of the World exposure gained through third-party funds. The regional specialists also run two other dedicated portfolios: F&C US Smaller Companies - a stockpicking fund with a leading long term performance record, although of course past performance is not a guide to the future - and European Assets Trust, a small and mid-cap play that also offers an income angle (see below).
F&C Managed Portfolio Trust is an investment trust that invests in other investment companies from across the whole market. It has both Growth and Income portfolios.
Of course, there is more to investing for growth – and indeed for income – than simply buying shares that are listed on a stockmarket. Within the F&C stable there are also investment trusts focusing on alternative asset classes. These include F&C Private Equity Trust, which blends private equity fund-of-funds investment with a number of direct co-investments and mainly focuses on the pan-European mid-market; Thames River Hedge+, a fund of alternative investment funds; and the Sigma shares of TR Property Investment Trust, which aim to capture growth opportunities among smaller listed property companies.
Investments mainly targeting income
With equity investments in many markets around the world having failed to impress at the capital growth level in recent years, income remains an important part of total returns, and is also of paramount concern to many investors. An investment does not have to have a specific ‘income’ label in order to generate income returns – Foreign & Colonial Investment Trust and F&C Global Smaller Companies, both members of the Global Growth sector, each have a 40-year record of dividend growth. However, there are many ways of maximising the income on offer, and by choosing investments with different income payment dates, investors can create a regular income stream.
A flagship trust from the historic Ivory & Sime stable, British Assets Trust blends a globally diversified equity portfolio with a weighting in corporate bonds in order to achieve both capital growth potential and a rising income, and currently yields 5.0%. All figures correct at 17 August. The value of investments and the income from them is not guaranteed and can fall as well as rise, and past performance is not a guide to the future.
The more UK-focused Investors Capital Trust has both equity and bond holdings to enable it to achieve a high income with the prospect of capital growth. In addition, its innovative structure enables investors to plan their tax liability, through the availability of two classes of share. The ‘A’ shares pay a dividend which is taxed as income, while the ‘B’ shares pay an equivalent amount as a capital distribution. These distributions are taxable under the capital gains regime, meaning investors can take advantage of their annual CGT exemption, and there is no tax payable (for gains above the threshold) until the investment is sold. Tax considerations should not generally drive investment decisions, however, and a financial adviser or tax specialist could help you decide what is most appropriate for you. The yields on the A and B shares are 5.9% and 5.0% respectively (they are different because the B shares currently trade at a small premium to net asset value while the A shares are at a slight discount).
European Assets Trust, while growthfocused in that it specialises in small and mid-cap companies, has a policy of paying a high yield to investors – currently set at 6% of net assets at the 31 December year-end.
F&C Managed Portfolio Trust’s Income portfolio invests in other investment companies across the globe, and has benefited in recent years from the launch of investment trusts concentrating on the growing income opportunities in Asian and emerging markets.
After a huge run-up in capital values (and subsequent slump) in the mid-2000s, investors in commercial property have reminded themselves that the asset class is primarily an income play. This has led to a rerating of property trusts in the last couple of years as the income from cash and bond investments has fallen. As well as TR Property Investment Trust, which invests mainly in the shares of property companies and has a policy of progressive dividend growth, F&C has three direct commercial property trusts: ISIS Property Trust, IRP Property Investments and F&C Commercial Property Trust. The last pays its dividends monthly, which could be of benefit to investors with regular income requirements. It currently yields 5.9%. Bear in mind that investments such as property and other alternative assets can be less liquid than investment in shares or bonds, and there may be difficulties with both buying and selling assets, depending on market conditions.
In summary, then, F&C’s long history has allowed it to build expertise in many areas of investment. And while no-one can know exactly what the future holds, recent volatility in asset markets may represent a buying opportunity for the pragmatic long-term investor.
Yield figures (net dividend yields) from Winterflood Securities, correct at 17 August 2011.
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