Have a look at any fund comparison table and you are likely to see a rainbow of performance charts going back one, three, five and, if you are lucky, ten years.
Long-term performance is everything in investing and fund managers live and die by their track records. Being able to navigate good and bad markets is a valuable skill and the longer they can demonstrate their ability to do it, the better.
In the investment trust world, no fund can boast a track record quite like the Foreign and Colonial Investment Trust, run by manager Paul Niven. Celebrating its 150th birthday today, the trust pioneered the concept of the pooled investment fund all those years ago and spawned the global industry we see today, all before the world saw lightbulbs, telephones and the humble zip-fastener.
Initially a means of bringing the advantages of a pooled investment approach to the investor of ‘moderate means’, Niven says the spirit of the trust hasn’t changed much since 1868, “Its objective is as true today as it was on the first day it was founded. It has continued to successfully evolve to ensure it remains relevant for investors of today.”
This objective of growth in both capital and income over the long-term lies at the heart of the fund, as well as its innovative (by 19th century standards) take on risk management. Niven explains, “Diversification remains an important aspect of our approach and the trust continues to be a core growth holding for many shareholders. A diversified approach with investments in listed equities and unlisted private equity across different geographies, sectors and styles means that we are well placed to continue to deliver on our aims.”
While companies in the trust have come and gone over the years (top holdings currently include Amazon, Alphabet and Alibaba), the major attraction for investors has been the consistency of the income provided. The trust has paid a dividend to shareholders in every year of its history and has increased dividends for 47 consecutive years, no small feat.
It has been able to do this thanks to a key advantage of the investment trust structure wherein returns can be put in reserve for leaner times to ensure a smoother income for its investors. Just one of the many benefits investment trusts can make use of, alongside access to investing in private companies and borrowing money with the aim of amplifying returns - although the inverse is possible here too.
Perhaps the most useful feature in ensuring the longevity of F&C’s vehicle is that, as an investment trust, it acts like any other company on the stock market, with a fixed number of shares in issue. While these might be bought and sold daily, the actual capital available to Niven stays within the trust and allows him to invest without worrying about keeping a cash buffer to meet investors’ withdrawals. This, in turn, lets him take an extremely long-term view in his investment decisions.
But it’s not all about the past. Looking ahead to the rest of 2018 and beyond, Niven is cognisant of potentially challenging markets but believes the fund is well-placed to deliver, “Interest rate rises and potentially higher bond yields may create some challenges for risk appetite in 2018. However, inflation, while expected to rise, should remain relatively benign. We anticipate that it will prove another positive year for equities, which are unlikely to have reached peak prices just yet.”
For more on investment trusts watch our latest video below. For more on the Foreign and Colonial Investment Trust visit the fund factsheet here.
The value of investments can go down as well as up so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. When investing in overseas markets, changes in currency exchange rates may affect the value of your investment. Reference to specific securities or funds should not be construed as a recommendation to buy or sell these securities or funds and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.