Investors gave F&C Investment Trust (FCIT) a big present for its 150th birthday last year, with a re-rating that enabled the £3.7 billion global investment trust to issue its first shares in six decades.
F&C, the UK's first investment trust launched in 1868, started last year with its shares trading on a 4.3% discount below net asset value (NAV) but as a result of the publicity from its historic anniversary moved to a premium above NAV for much of the second half, although it ended the year on a narrow discount of 1.5% after in response to the global market sell-off.
In November the board, chaired by Simon Fraser, took advantage of the re-rating, to re-issue 100,000 shares that had previously been bought back and held in treasury. Encouraged by a return to a small premium at the end of January, it issued another 1 million shares.
Although the number of re-issued shares is small compared to the more than 543 million on the market, it is a symbolic move following nearly two decades in which the trust bought back huge quantities of stock to tackle the wide discount at which they traded and also oversaw a shift in its share registrar from disaffected institutional investors to more eager private investors.
‘Our 150th anniversary year saw our long-held aspiration of the company’s shares trading at or close to NAV being reached and our first issue of shares since 1959,’ said Fraser.
‘The issuance is believed to be the first that the company has made at a premium to NAV in its 150-year history.’
Last year marked the first time since 2002 when no shares were bought back, although Fraser said the trust was ‘firmly committed to the use of buybacks in normal market conditions for the benefit of shareholders’ if the trusts moves back to a discount.
Maintaining demand was a tough task in what Fraser described as the ‘most challenging year since the financial crisis’ but the manager, BMO’s Paul Niven (pictured), managed to just about beat his benchmark.
Nevertheless, Fraser said ‘while traditional global trade routes are under threat, new ones are developing’ and the trust is able to weather the storms that are coming.
The trust’s total return on net assets, including dividends, fell 3.3% in the year to 31 December, slightly better than the FTSE All-World index which shed 3.4%.
It was a good year for dividends, however. Subject to approval, a final dividend of 2.8p per share in May will bring the total payout for the year to 11p, up 5.8% on the previous year and beating inflation of 2.1%. This is F&C's 48th consecutive dividend increase and was covered by earnings.
Since the year end the shares have gained 8% as markets have rallied after the fourth quarter retrenchment. This takes ten-year total shareholder returns to 323%, ranking it around the middle of the AIC Global sector.
F&C is also rewarding investors with a small cut in the annual management charge (AMC) paid to BMO Global Asset Management. Backdated to 1 January the AMC of 0.365% of market value will be replaced a tiered fee of 0.35% up to £3 billion, 0.3% between £3 billion and £4 billion, and 0.25% above £4 billion. At the trust's current size this will reduce the fee by 0.02% to 0.345%.
‘This will help bring down our cost ratios further as the company grows with the benefits of scale being passed on to shareholders,’ said Fraser.
Numis Securities analyst Priyesh Parmar said Niven runs a more diversified portfolio than its peers and Niven’s track record is ‘solid’ and ‘well placed to deliver attractive long-term NAV growth, with lower volatility returns than many of its peers in the global equity sector’.
‘The fund’s share price returns have been boosted by a narrowing of the discount over the past two years, and while this will no longer be a following wind, we believe that the current rating is sustainable given the retail nature of the share register,’ he said.