F&C Investment Trust: June 2025 update

• Paul Niven uses a multi-manager approach to invest in both public and private companies around the globe

• The trust has performed better than its benchmark and the sector average since he took it over in 2014

• The trust’s impressive dividend record continued, although income is variable and not guaranteed.

How it fits in a portfolio

F&C Investment Trust aims to grow income and capital over the long term by investing in companies from around the globe. Developed markets like the US, Europe and Japan are the primary focus but it also invests in higher-risk emerging markets.

The manager also takes advantage of the trust’s closed-ended structure by investing in early-stage private companies. By nature, although the rewards can be attractive, these are higher risk since they can be harder to sell – meaning they are less liquid. Tapping into all corners of the market, the trust could add diversification to an investment portfolio focused on income or both income and growth.

Manager

Paul Niven joined what was then Foreign & Colonial (now Columbia Threadneedle – or CT) as a graduate in 1996. He initially analysed Asian companies but has spent much of his career focused on asset allocation (deciding how much to invest in different assets, such as company shares or bonds). He’s now lead manager of several funds and is CT’s Head of Multi-Asset Portfolio Management.

Niven is the 11th manager of F&C Investment Trust and has been at the helm since July 2014. He doesn’t do all the investing by himself though. The trust is divided into different segments, each with their own dedicated manager. The majority are run in-house by CT, but external managers are also used where he feels they can add value. Each manager has different strengths, styles and areas of focus which are blended together and monitored closely. This is known as a ‘multi-manager’ approach.

Process

Niven guides the asset allocation and manages the level of risk the trust takes. His framework centres around four pillars: economy, policy, valuation and behavioural factors.

Key economic indicators such as inflation and economic growth rates are monitored for different regions, alongside the level of support from governments and central banks. Niven and his team then assess how expensive or cheap (a measure of value) each region is compared to its history and other similar markets. Finally, they assess how sentiment is changing towards each region.

The underlying portfolios are each managed by different managers, most of which are run in-house by CT which helps to keep costs down. Where Niven believes CT doesn’t have market leading capabilities and insights, such as the exposure to US growth companies, he uses external alternatives. This approach means the trust is well diversified and provides exposure to over 400 companies.

Historically the trust had a much larger amount invested in the UK, but it now accounts for 10.5%. 61.0% is invested in North America, which is similar to the amount in the global stock market. The rest is a mix of Europe, Japan, and higher-risk emerging markets. Niven can also allocate to smaller companies which can add risk.

At the end of the trust’s last financial year in December 2024, 10.9% of its assets were invested in private companies. These are companies that aren’t listed on the stock market, but Niven thinks they can provide good long-term growth potential.

Over the past financial year, the most significant change to the trust was the sale of Pyrford International, which previously managed the trust’s global value exposure. The proceeds were reallocated to both the Global Focus and Global Enhanced strategies. The trust also increased its exposure to both US Growth and US Value funds. Investments in Europe (including the UK), emerging markets, and Japan were reduced.

The manager uses gearing (borrowing to invest), which can magnify gains but also increase losses, so it’s a higher-risk approach. The level of gearing at the end of April 2025 was 4.8%. He has the flexibility to use derivatives, which if used adds risk. Potential investors should refer to the latest annual reports and accounts for details of the risks and charging structure.

Culture

F&C Investment Trust is the oldest trust in existence, having been founded in 1868 as a way for everyday people to pool their resources to invest. Nowadays the trust is part of CT, previously BMO, a large multi-national financial services company headquartered in Canada. On 8 November 2021, Columbia Threadneedle Investments, which is part of Ameriprise Financial Inc. acquired BMO’s EMEA (Europe, Middle East, and Africa) asset management business. CT now manages the trust, and the board remains comfortable that little will change in light of these developments.

Along with the trust, Niven manages several other CT funds. These include multi-asset funds of varying risk levels and sustainable versions of them. We prefer managers to run as few funds and trusts as possible so they can dedicate more time and focus to each one, however Niven does have significant resources and the support of a large team.

ESG Integration

CT believes well-managed companies that look to the future are better positioned to navigate the risks and challenges inherent in business. In recent years the firm has developed several proprietary tools, including a company rating system that combines an assessment of how well a company manages its “financial stewardship” with a view of how well it manages its Environmental Social Governance (ESG) risks. Both aspects are combined into a single, forward-looking rating from ‘one’ to ‘five’. Our meetings with CT fund managers suggest the ESG tools are relatively well-used by the investment teams, and managers are generally aligned with the view that an understanding of ESG factors is essential if you want to get a full view of a company’s risk/reward profile.

The firm’s Active Ownership team coordinates voting and engagement activity. Engagement generally focuses on the current and emerging ESG issues that the team thinks will have the greatest impact on long term investment returns, the economy, the environment, and society. The team also undertakes event-driven engagement in response to unscheduled or controversial events. All engagement is tracked in a company-wide database and accessible to all research analysts and portfolio managers.

Engagement progress and voting activity is reported to investors in a quarterly and an annual Stewardship report. The firm also writes frequent thought leadership and insight articles.

Although this trust isn’t specifically an ESG trust, Niven ensures all fund managers he invests with integrate ESG analysis into their decision making. He also ensures the funds are signatories of UNPRI.

Cost

The ongoing annual charge over the trust’s last financial year to 31 December 2024 was 0.45%. This was lower than the year previously where the annual charge was 0.49%. Investors should refer to the latest annual reports and accounts, and Key Information Document for details of the risks and charging structure. If held in a SIPP or ISA, the HL platform charge of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. The platform charge doesn’t apply if the trust is held in a Fund and Share Account or Junior ISA.

Investment trusts trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges within any Hargreaves Lansdown account, except online in the HL Junior ISA.

Performance

Since July 2014 when Niven took the reins, the trust has performed better than its benchmark, the FTSE All World Index. Over this time its share price has grown 244.79%* vs 234.11% for the benchmark. The trust has also outperformed the AIC Global sector average which returned 175.12.%. Its Net Asset Value (NAV) also rose 232.31.% over this period. Remember past performance is not a guide to the future. All investments fall and rise in value so you may get back less than you invest.

Over the trust’s past financial year to the end of December 2024, its share price increased 16.94% vs 19.81% for the FTSE All World. The AIC Global sector average increased 16.30%. The trust’s NAV also increased by 20.36%.

The North American portfolios delivered the strongest performance, led by the growth strategy managed by JP Morgan. Streaming and media company Netflix contributed significantly, as its subscriber count approached record highs. Meta, the social media and advertising giant, also performed well, driven by continued growth in its digital advertising business. The value portfolio, managed by Barrow Hanley, also delivered strong results. Carnival, the cruise ship operator, benefited from increased demand for cruise holidays and has since ordered new ships to meet this growing demand.

The European portfolio saw positive contributions from several holdings. UK bank NatWest was a notable performer, with rising profits. Irish housebuilder Cairn Homes also delivered strong returns, supported by increased housing delivery. However, Dutch beverage company Heineken struggled as sales slowed, leading to it being sold by the European managers during the year.

The trust’s Japanese portfolio also saw positive developments. The country benefited from healthier wage growth, modest inflation, and long-awaited improvements in corporate governance. Investments in financial companies such as Mitsubishi UFJ and Nishi Nippon gained from these trends, particularly as central banks began raising interest rates.

The emerging markets portfolio had a mix of strong and weaker performers. Vietnamese technology firm FPT Corporation and Indian healthcare provider Max Healthcare both performed well. In contrast, Hungarian budget airline Wizz Air faced challenges due to many planes suffering engine issues, which later lowered profit expectations.

The trust’s investments in private companies performed better than the previous year returning 9.7%.

The total dividend per share for the year to 31 December 2024 was 15.6p, which is an 6.1% increase on the previous 12-month period. This trust is an AIC ‘dividend hero’ having increased its dividend for the 54th year in a row.

At the time of writing the trust trades on an 8.64% discount. This is marginally higher than its average over the last 12 months which is -8.49%. The trust currently yields 1.44% although remember yields are variable and aren’t a reliable indicator of future income.