F&C: Simplicity in a complex world

We’re all encouraged to invest for the future, but finding the right investments is a huge challenge. There are thousands of investments to choose from, all of which offer something different and come with their benefits and drawbacks. 

If you decide to purchase individual stocks and shares of familiar and trusted companies, there is a drawback. Research indicates that only about 4% of stocks have generated positive returns over the long term.

If the previous approach doesn't seem viable, another option is to invest in a collection of funds. However, this also comes with its challenges. Fund fees can be confusing, and most funds concentrate on a specific sector or asset class, requiring investors to put in significant effort to find ones that align with their risk tolerance and market outlook. If this seems overwhelming, rest assured that many others feel the same way.

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The £5.4bn F&C Investment Trust, a FTSE 100 constituent, offers a solution to both of these issues.

A long track record of looking after investors 

Investment trusts are one of the oldest types of investment funds. Structured as investment companies, they own a portfolio of investments with their own board of directors. These directors oversee the performance of the trust’s fund managers and ensure the company is providing value for money for its shareholders. If they’re disappointed with the performance or worried about the investment managers' direction, the board can demand changes. 

Shares in these investment companies can also be bought and sold on the stock exchange, and the company structure means managers don't have to worry about daily inflows and outflows, giving them more flexibility in choosing investments. Managers can focus on long-term strategies rather than short-term profits. 

This level of independence is one of the reasons why these investment vehicles have survived so long and continue attracting investors today. 

F&C is the oldest investment trust in the world. It has been looking after shareholders' money since 1868 and has continuously increased its dividend every year for 52 years -  a testament to the structure of investment trusts. Companies can hold back 15% of any income earned each year as a reserve to help maintain dividends in tough times. 

F&C has established a strong track record due to its investment approach. It holds a diverse range of investments, with over 400 holdings across 10 different markets worldwide. The Trust's investment management team carefully selects these investments aim to achieve both long-term capital growth and income, without limiting themselves to any specific sector or industry.

The portfolio also offers exposure to private equity funds, a section of the market investors usually overlook due to its complexities. As of 30 June 2023, the allocation to private equity is 11.8%. 

Private equity funds are investment pools that collect money from investors to invest in privately held companies. These funds are managed by private equity firms, which aim to generate high returns by actively managing and improving the companies they invest in. The funds exit their investments through IPOs, acquisitions, or other sales.

Private equity is considered a riskier investment, but it also diversifies F&C’s portfolio. 

When combined with global mega-cap stocks, companies such as Apple and Microsoft, as well as smaller growth plays and income stocks, F&C offers investors a one-stop shop portfolio with exposure to all of the market’s major growth themes and sectors. 

A home for experienced investors and beginners 

With its diverse portfolio of companies in different sectors, and countries and focus on income as well as growth, F&C is a fantastic choice for both beginners and experienced investors. 

Many investors, including those with extensive experience, have blind spots when it comes to investing. For instance, data reveals that many UK investors are overly focused on the domestic market, and this pattern is repeated in other markets as well. This has been a drawback since 2016, but the Trust's portfolio could have provided a solution to help investors mitigate this risk and diversify their holdings beyond their home market.

Investors also tend to have too much exposure to the companies or sectors they think they know best. This can once again be a significant drawback because, as noted earlier, only a tiny percentage of stocks perform well over the long term. There's no guarantee just because you know a market well, it's going to do well as an investment. 

F&C focuses on a steady approach rather than high growth over the long term. It's focused on future growth, not short-term quick wins, reducing the impact of volatility and uncertainty for investors.

That’s why F&C’s offering is so attractive for both experienced investors and those who are new to investing. Its portfolio of more than 400 companies gives investors an instant, globally diversified portfolio, managing risk and freeing up more time for you to enjoy life. The trust’s ongoing charges are 0.54% per annum.

Key risks  

• Capital is at risk and there is no guarantee that investors get back the amount invested.
• The value of investments and the income received from them can fall as well as rise as markets fluctuate. 
• There is no guarantee that F&C dividends will continue to grow in the future.

Approved for distribution 05/09/23 by Columbia Threadneedle Investments. Authorised and regulated in the UK by the Financial Conduct Authority