F&C - Don’t overestimate impact of UK election

With the shape of the new Government now known, the UK faces headwinds from £6bn of budget cuts to be announced as early as next week, with the prospect of much more to follow. Added to this is the threat to individual investors of a big hike in the rate of capital gains tax.

However, Jeremy Tigue, manager of Foreign & Colonial Investment Trust (FCIT), is sanguine about the likely effects on the 142-year-old trust's portfolio.

"Although the election will have an impact on all of us individually I do not think it is going to have much of an impact on our total portfolio," said Tigue. "Only a third of our assets are invested in UK stocks. Looking at where those companies operate, some two thirds of their profits arise outside the UK. So our exposure to the UK economy is about 10% of our total assets. To put it bluntly what happens in the domestic UK economy, rather than the market, is of limited importance to us."

Speaking at FCIT's AGM on 6 May, Tigue added that this effect was evident in the run-up to the election when a proposed tax on Australian mining companies had more impact on UK listed mining stocks and thus the FTSE100 index than any news from the election campaign.

Foreign & Colonial Investment Trust recently published its interim management statement for the three months ended 31 March 2010. This showed a net asset value total return per share of 8.2% over the three months, slightly behind the composite benchmark (40% FTSE All-Share and 60% FTSE World ex UK) return of 9.1%.