The 143-year-old Foreign & Colonial Investment Trust (LSE: FRCL) may be an unfashionable investment choice, but its 16.9% return over the past year shows the trust is holding up well in its old age. The trust’s performance holds up over the longer term too, with a 36.6% return over five years, comfortably ahead of the 28.6% gain seen in its benchmark, the global growth sector. Better still, the £1.8bn trust trades at a 9.3% discount to net asset value (so you can buy almost £1 of assets for 90p), and also pays a 2.2% dividend yield.
The trust’s private-equity portfolio has helped it deliver a solid performance in the first half of 2011 – it rose 11% and cash realisations from its private equity investments grew significantly. “We are on the cusp of seeing significant cash returns from our private-equity funds and our highly diversified listed portfolio gives us exposure to many growth opportunities,” said Simon Fraser, chairman of the trust’s board, when the trust announced its first-half results.
Another key factor that helped, says Nick Goodway in the Evening Standard, was that long-time manager Jeremy Tigue spotted last year “that many companies were in a position to start raising their dividends well above inflation”. As a result, the trust collected £31.9m in dividends in the first half of 2011, up from £24.9m the year before.
Tigue isn’t an outright bull. “None of the problems that have worried investors have been resolved” and stockmarkets will remain “directionless”, but “profits and dividends are rising, and alternatives to equity investing look very unattractive”.
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Foreign & Colonial Investment top ten holdings
| Name of holding | % of assets |
|---|---|
| Pantheon Europe Fund III | 2.90% |
| Pantheon Europe V | 2.40% |
| Harbourvest V Direct Fund | 2.30% |
| Vodafone Group | 2.10% |
| Rio Tinto | 2.00% |
| HSBC Holdings | 2.00% |
| GlaxoSmithKline | 1.90% |
| BP | 1.80% |
| Harbourvest Buyout Fund VII | 1.60% |
| British American Tobacco | 1.50% |