Foreign & Colonial Investment Trust reaches 140-year milestone

Next week sees a remarkable milestone for the fund management industry as the Foreign & Colonial Investment Trust, a £2.5 billion London-listed company, clocks up a staggering 140-year track record.
Launched on 19 March 1868 as the first-ever investment trust it effectively signalled the birth of today's global multi-trillion dollar collective investment industry, pre-dating the first mutual fund by half a century.

Founded in the year that William Gladstone assumed office as British Prime Minister, the last public hanging took place in England and the US Constitution was amended to give former slaves citizenship, the 'Foreign & Colonial Government Trust' was the brainchild of London lawyer Philip Rose. His revolutionary idea was to create an investment vehicle that would "give the investor of moderate means the same advantages as the large Capitalists, in diminishing the risk of investing" to be overseen by a group of trustees chaired by eminent judge Lord Westbury.

Through investment in an initial portfolio of 18 holdings in government bonds and colonial stocks from far flung corners of the world the opening yield of Foreign & Colonial was a then eye-popping 7 per cent - at a time when British gilt-edged securities were yielding a mere 3 per cent. No wonder then that within two decades the idea caught on with a flurry of investment trust launches.

Pioneering global investment

Over its long-history Foreign & Colonial Investment Trust has pioneered the concept of global investment. The initial portfolio invested in stocks from Argentina, Brazil, Chile, Russia, Spain, Turkey, and the United States of America. In 1881 it made its first investments in India, Australia, Germany, France and Japan, followed by South Africa in 1883, China in 1886 and Hong Kong in 1934.

Foreign & Colonial invested in its first non-government bonds in 1891 (and dropped "Government" from its name), which "refreshingly" included New England Breweries and New York Breweries. In 1925 it made its first foray into equities with the purchase of 2,000 shares in oil company Shell Transport & Trading. The stock has been consistently held in the portfolio for almost 83 years with nearly 3.45 million shares now held in Royal Dutch Shell. In 1943 it made its first direct private equity investment (Robert Fleming Holdings).

Today the Foreign & Colonial Investment Trust is a globally diversified equity portfolio invested 38 per cent in the UK, 19 per cent in North America, 14 per cent in Emerging Markets, 10 per cent in Europe, 9 per cent in Private Equity, 5 per cent in Developed Asia and 5 per cent in Japan. It has more than 700 underlying holdings in 35 countries.

Championing the retail investor

Consistent with its original aspiration of enabling investors of "moderate means" to invest in exotic corners of the globe and access opportunities hitherto only available to the very wealthy, the early shareholder registers of the Foreign & Colonial Investment Trust include Victorian investors who described their professions as a Slater, Warehouseman, a Flax Spinner – as well as the odd aristocrat. A revolution in widening public access to the capital markets had begun.

Roll-forward 140 years and the Foreign & Colonial Investment Trust's shares are now 82 per cent held by retail investors. Confounding the sceptics who have questioned whether there is still a role for large globally diversified investment trusts, Foreign & Colonial Investment Trust remains a popular choice with small savers seeking a one-stop international investment portfolio with costs that are a fraction of those on a typical mutual fund. Some 37 per cent of the shares are held through savings schemes thanks to F&C's innovative, but at the time controversial, decision to launch the first-ever UK investment trust regular savings plan in 1984. Prior to this the purchase of shares in investment trusts had only been available through the services of a stockbroker. Today, Foreign & Colonial Investment Trust's 107,000 individual shareholders include a new generation of investors in the form of around 20,000 children through Child Trust Funds and Children's Investment Plans. Last year Foreign & Colonial shares accounted for 26 per cent of all inflows into UK investment trust savings wrappers.

1868-2018 vision

At its preliminary annual results for 2007, issued to the London Stock Exchange today, the Foreign & Colonial Investment Trust revealed that it had delivered an NAV total return of 15.4 per cent, well ahead of its benchmark return of 7.9 per cent. Positive contributions to performance were each made by asset allocation decisions, stock selection, use of gearing and share buy backs. The trust also announced that it would increase its dividend by 10.4 per cent, representing 38 consecutive years of rising dividends.

Jeremy Tigue, the fund manager of the Foreign & Colonial Investment Trust, said: "Over 140-years Foreign & Colonial has seen bull markets, bear markets, two World Wars, the rise and fall of Fascism and Communism, oil crisis, hyperinflation, disinflation and a credit crunch. It has not only survived these events but has prospered for its shareholders by evolving over time, taking conviction views on investment themes and being prepared to go against the crowd in the relentless search for good long-term returns. What has remained constant throughout is our belief that what we are about is providing a core home for the long-term cash of ordinary savers, enabling them to benefit from opportunities across the global. Today, this includes providing them with some exposure to alternative asset classes such as private equity funds, listed hedge funds and non-traditional equity investment strategies."

"Where will we be in 2018 at our 150-year anniversary?," mused Tigue, "I hope that more than a third of our shareholders will be under-18, with more than 90 per cent of the shares in the hands of retail investors and that we will be celebrating a 48-year record of consistently rising dividends."