Foreign & Colonial Investment Trust (FRCL) is the oldest collective investment fund in the world, dating back to 1868. Manager Paul Niven aims to generate long-term growth in capital and income by investing in a range of focused strategies run both by BMO Global Asset Management and external managers. The portfolio is diversified by geography, sector and style; the trust is overweight Europe ex-UK and emerging markets, and underweight North America. FRCL also invests in private equity. Gearing of up to 20% of net assets is permitted. FRCL has a progressive dividend policy; the annual dividend has increased in each of the last 45 consecutive years and, following the repayment of a longstanding debenture at the end of 2014, interest costs have declined meaningfully.
FRCL has a large, diversified portfolio invested in a range of regional and global strategies with a c 10% weighting in private equity. Since the beginning of 2013, the benchmark is the FTSE All-World index, reflecting a lower weighting to UK and a higher weighting to global equities. On a geographic basis, the portfolio’s largest overweight exposures are Europe ex-UK and emerging markets, while there is a material underweight exposure to the US. The current 6.1% level of gearing is towards the bottom end of the historical range following a reduction in equity exposure and private equity cash returns.
Despite the near-term increase in global bond yields, equity dividend yields remain higher than the income available from government bonds. While equity valuations are modestly above 10-year averages, the latest World Economic Outlook from the International Monetary Fund reaffirmed its estimates for global growth of 3.1% and 3.4% for 2016 and 2017 respectively. In an environment of forecast accelerating economic growth and low interest rates, investors may be interested in a wellestablished fund that aims to generate long-term growth in both capital and income.
FRCL’s current 8.7% share price discount to cum-income NAV is broadly in line with the averages of the last one, three, five and 10 years (range of 9.1% to 9.7%). FRCL has a progressive dividend policy aiming to grow annual payments above the level of UK inflation. If the annual dividend is increased again in 2016, it will be the 46th consecutive year.