Better year for Growth pool in F&C Managed Portfolio – F&C Managed Portfolio has published results for the year ended 31 May 2017. The NAV total return (i.e. adding dividends paid to capital performance) was 24.5% for the Income shares and 26.4% for the Growth shares. This compares with the 24.5% total return for the All-Share Index, the benchmark index for both portfolios.
They say that the investment company sector, as measured by the Equity Investment Instruments Index, returned 29.9%. The UK equity market moved ahead strongly, in part due to the significant decline in sterling following the EU Referendum result and also the further cut in interest rates shortly thereafter. The sector benefitted from the substantial exposure to overseas equity markets of many investment companies. Strong local equity market returns were boosted by currency weakness when translated back into sterling, as illustrated by the total return of 33.2% in sterling terms from the MSCI All Country World Index.
For the year ended 31 May 2017, four interim dividends have now been paid, totalling 5.45p per Income share (5.2p for the previous year). In the absence of unforeseen circumstances, your Board intends again to declare three interim dividends, each of not less than 1.25p per Income share payable in October 2017, January 2018 and April 2018. A fourth interim dividend will be paid in July 2018 when a clearer view emerges of income for the year.
Growth Portfolio – Leaders and Laggards
The two strongest performers in the Growth Portfolio were Polar Capital Technology Trust and Allianz Technology Trust, both gaining over 70%. Both of these trusts have outstanding long term records and are a good way for the Growth Portfolio to gain exposure to the secular growth characteristics represented by the dynamic US technology sector. The next two best performers are both managed by Baillie Gifford. Monks Investment Trust rose by 68% whilst Scottish Mortgage Investment Trust was ahead by 53%. Although both trusts employ a growth focussed investment strategy, the latter is more concentrated with a bias towards technology companies whilst the former is more diversified by number and nature of holdings. Special mention should also be made of River & Mercantile UK Micro Cap Investment Company which recorded a 45% gain due primarily to outstanding stock selection.
Two holdings which underperformed over the year were Sanditon Investment Trust which fell 6% and BH Macro which rose 4%. Both funds are defensive in nature and are held to provide an element of protection for the portfolio in a market setback. That they lagged a sharply rising equity market is not unexpected. Woodford Patient Capital Trust was down 4%. The fund is not a mainstream play on UK equities as it comprises a portfolio of private early stage and listed early growth companies, mainly spin outs from UK universities. Given the nature of these companies it will take time for them to come through and no doubt there will be failures along the way. However many of the underlying portfolio companies have made good progress and there is reason to believe that for the patient investor there will be significant upside potential.
Income Portfolio – Leaders and Laggards
Two of the leading performers were trusts which specialise in overseas private equity investments. NB Private Equity Partners delivered a 58% return whilst Princess Private Equity Holding gained 59%. Both funds also significantly benefitted from sterling devaluation against the dollar and the Euro. The former concentrates mainly in the US and offers a 4% dividend yield, whilst the latter is more global in its approach and has a dividend yield of over 5%. As with many private equity trusts both experienced a welcome narrowing of the discount between the share price and the asset value over the period.
The common theme of other strong performers was exposure to overseas equity markets where good local currency gains were further enhanced by sterling weakness. Examples include JPMorgan Global Emerging Markets Income Trust which rose 46%, The Bankers Investment Trust which was ahead by 38% and Murray International Trust which was up by 39%.
When equity markets have such a strong year, the laggards in the portfolio would tend to come from trusts which are not invested in equities. GCP Infrastructure Investments delivered a steady dividend yield of over 6% but only experienced a 10% rise in its share price. Similar trends were evident with Carador Income which rose 14% and CQS New City High Yield Fund which was ahead by 15%. Dividends were maintained at a high level although the capital performance could not keep pace with equity market returns.
FMPI / FMPG : Better year for Growth pool in F&C Managed Portfolio