F&C (FCIT) investment trust will ask shareholder approval for a four-for-one share split at its annual general meeting next month in response to the long-term rise in the share price.
The country’s oldest listed investment fund, launched 158 years ago in 1868, said quadrupling the number of F&C shares without altering shareholders’ total holdings, would make them easier and cheaper to trade and make reinvestment of dividends into the stock less cumbersome.
Chair Beatrice Hollond said the proposal to issue shareholders with four shares for every one they own reflected the company’s share price rising from 258.5p at the end of 2005 to £12.52 at 31 December. She said shareholders had told the board a share split would be welcomed. If approved, it will take effect on 11 May.
Over 20 years to the end of 2025 F&C generated an underlying total return from its investments of 567.7%, or 10% a year. The capital-only return without dividends reinvested from the growth in net asset value (NAV) was 384.3% or 8.2% a year, while the total shareholder return including dividends was 619.1% or 10.4% per annum.
Such returns demonstrated the importance of compounding income and capital gains over the long term. Hollond said they were a reminder that, despite bouts of volatility from events such as the current US and Israel war against Iran, “the longer the holding period, the greater the likelihood of positive returns”.
US and Europe underperform
The announcement came in annual results showing the £5.8bn global trust’s underlying investment return underperformed its benchmark last year. A weak dollar combined with some disappointments in Europe and the US saw F&C generate an 11.6% return against the FTSE All-World index gain of 14.2%. However, shareholders did slightly better than the benchmark with a 14.6% total return as its share price discount to NAV narrowed.
Hollond, who will retire later this year after nine years on the board, said the FTSE 100 fund enjoyed strong returns from all its listed equity strategies, especially in US value and emerging markets holdings. However, relative returns from the European portfolio and some US components were “disappointing” despite the correct decision to hold underweight positions in most of the so-called “Magnificent Seven” mega-cap US technology companies as markets broadened away from this narrow group of stocks.
In North America, to which F&C has 62.7% geographic exposure, the trust made an 8.2% return compared to the 10% market return in sterling. Europe including the UK, where the trust holds 19.5% of its assets, made 16.9% but underperformed more severely against the 26.2% index return. Emerging markets, where just 8.7% is invested, made 27.6% to beat the benchmark’s 24.4%.
F&C saw its private equity portfolio, which includes Baillie Gifford’s Schiehallion (MNTN) and life sciences fund Syncona (SYNC), produce “respectable” absolute returns, although Hollond admitted that at 5.3% these were “significantly behind” its listed benchmark.
Nevertheless, she said both shareholder and underlying NAV total returns were better than the median of F&C’s closed and open-ended peers for the year and “it is very pleasing that we remain ahead of the peer group median over one, three, five and ten years”, she added.
“Over the ten years to the end of 2025 your company delivered a share price total return equivalent to 12.6% per annum,” she told shareholders.
Dividends rise 6.4%
There was good news on dividends too as the company declared a 5.2p per share final dividend to bring the total 2025 pay-out to 16.6p, a 55th consecutive annual rise, covered by earnings.
Although the 1.3%-yielder is not an income fund, its track record here is strong. The 6.4% increase in dividends last year beat 3.4% annual inflation as it has done over three, five and ten years. Over a decade, F&C has grown its distribution by 72.9%, almost double the 39.7% advance in consumer prices. With revenue reserves of £125.5m equal to around one year of dividends, and £5.8bn of capital reserves, F&C was “very well placed” to continue this “well into the future”.
AI risks and rewards
Fund manager Paul Niven, head of multi-asset solutions at Columbia Threadneedle, said: “Stronger earnings foundations, more opportunities within global equity markets and a more even distribution of market leadership support a favourable environment for diversified global equity investors.”
However, good stock picking was essential to navigate the AI revolution and the “extraordinary levels of capital expenditure” to build the data infrastructure and energy capacity needed to support future applications. “There is justified optimism about the long-term productivity benefits that these technologies can unlock. However, such rapid investment inevitably brings areas of over spend and pockets of unprofitable activity and we expect investor returns to vary widely across the value chain,” Hollond cautioned.
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