Should you buy shares in F&C? What to buy, sell or avoid

There are few companies listed in London that can trace their heritage all the way back to the reign of Queen Victoria. The £5.2 billion F&C Investment Trust is one of them.
The fund, which is a member of the FTSE 100 and is the world’s oldest investment trust, is an old City favourite, having built up a dedicated following of investors over its 156-year history. These shareholders are sitting pretty: over the past two decades, F&C has delivered a total return — which combines share price returns and dividends — of more than 700 per cent, blowing both the global stock market and the rest of the FTSE 100 out of the water.
Its official aim is to grow its shareholders’ money through a global portfolio of stocks and private equity. This wide mandate means the fund has been able to move away from the “Magnificent Seven” narrative that has dominated the market, investing more heavily in areas such as healthcare and real estate, as well as unlisted businesses.
The trust is a “multi-manager” fund, with the F&C manager Paul Niven outsourcing stock picking to specialist teams but having ultimate control over the fund’s asset allocation. Overall the chip designer Nvidia is still the fund’s biggest single holding, accounting for 3 per cent of assets, but it is still slightly underweight in the market darling relative to an index tracker, which reflects the fund’s cautious attitude toward tech valuations.
This may suit investors who are worried about a potential AI bubble in the market, but F&C’s relatively small allocation to other global investment funds has held back returns in recent years. The trust has failed to match the global stock market over the past five years, delivering a total return of 63 per cent versus 90 per cent from the MSCI World index.
That being said, F&C’s longer-term performance has been enviable, and longevity is built into its DNA. The fund, formerly known as Foreign & Colonial, has been managed by Niven for a decade. He replaced Jeremy Tigue, who had served as the fund manager since 1997. Tigue had replaced Michael Hart, who was the head investor for 28 years from the late 1960s.
Niven has delivered a total return of more than 200 per cent over his tenure, outperforming the global stock market, although a series of buybacks over that period means the fund has roughly doubled in size rather than tripled.
Prospective investors should keep an eye on the trust’s relatively high allocation to private equity, where just over a tenth of the portfolio was invested as of the end of June. This part of the strategy includes investments managed by private equity firms such as Pantheon and HarbourVest, which typically oversee funds made up of other funds.
This section of the portfolio was a boost in 2021 and 2022, even outperforming the listed section of its portfolio, but dropped by 1.7 per cent last year. Still, F&C maintains that it focuses on mid-market range in private equity, which has been less exposed to some of the more speculative areas in the sector. In the first half of this year, its unlisted businesses had recovered, returning 6 per cent.
F&C’s dividend yield is nothing to write home about, at a modest 1.4 per cent. But growth in income is in its official mandate, and as such the fund has increased cash payouts to shareholders for 53 years in a row, an impressive record that it will be unwilling to break.
F&C now trades at a 9 per cent discount to its net assets, compared with a 4.8 per cent average discount over the past five years and an 11 per cent discount among other investment trusts that specialise in global stocks. The shares look good value for a new investor, as well as long-term shareholders who want to top up their holding. Advice Buy Why City favourite at an almost double-digit discount
Investment trust fans may also recognise the name RIT Capital Partners, the £2.6 billion fund managed by Rothschild. The FTSE 250 trust has an impressive long-term record, but in the past few years, performance has been underwhelming to say the least. It has lost roughly a quarter of its value since 2021.
Perhaps not surprisingly, the shares trade 29 per cent below their net asset value. While this does suggest the market is ignoring a big chunk of value, part of the discount is due to a perceived lack of transparency around how the fund works.
RIT has taken steps to improve this in recent months, with a new website and a more detailed monthly factsheet that includes commentary on how the portfolio has been progressing, alongside clearer explanations of its investment strategy.
The fund has three main pillars: listed equities, private investments and “uncorrelated strategies”. The final one includes more complex holdings such as credit investments, real estate and government bonds, and usually makes up 20 to 40 per cent of the fund’s overall net assets, at a similar proportion to its private investments. Listed equities typically make up somewhere between 30 and 60 per cent.
RIT’s improved communication makes it much easier to understand how the fund is performing and why, which is critical for a fund that invests outside the traditional stock market.
But there is still much uncertainty around the trust, not least whether new chief executive Maggie Fanari and chief investment officer Nick Khuu can turn performance around.
In the six months to June, the quoted part of the portfolio delivered an 8.5 per cent return, compared with a 14 per cent rise in the MSCI World Index, which is encouraging given it does not invest as much in the big technology names driving the market. One of its biggest holdings is in London-listed National Grid.
For investors looking for a meaningful way to diversify away from the main market, RIT Capital could eventually be a good pick, although waiting for the shares to pick up some momentum may be wise. Advice Hold Why Good signs of turnaround but await longer track record under new team
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