It is an understatement to call Foreign & Colonial Investment Trust (LSE: FRCL) the ‘daddy’ of investment trusts. It is more like the great-great-great-grandfather, having been launched way back in 1868 as The Foreign & Colonial Government Trust, investing in government bonds. It was the first collective investment scheme in the world… ever.
In 1891 the board changed its name to The Foreign & Colonial Investment Trust (traditionalists are still getting over the shock) and in 1925 widened its remit to invest in equities as well. Today, it is a £3.15bn giant with exposure to over 500 companies across the globe, and has just published its best set of annual results for a decade.
It shook-off market volatility to deliver a net asset value total return of a whopping 23.9% for the year, its best number for more than a decade, with a share price total return of 23.7%. This beat most of its peers although interestingly, its benchmark index, the FTSE All World, did better, soaring 29.6% over the same time scale.
Foreign & Colonial was punished by its underweight position in the highly-performing US, and some underperforming stocks as well. Exposure to private equity trailed benchmarks, while it also missed out on the rebound in resources and economically sensitive stocks. However, I don’t think many investors will be griping.
Chairman Simon Fraser said global equity markets saw their strongest annual returns since 1999, measured in sterling terms and therefore boosted by last year’s Brexit currency crash. Over 10 years, Foreign & Colonial has delivered a total share price return of 141%, equivalent to compounded growth of 9.2% a year.
The Victorians built things to last and this trust is more than simply a growth monster, it is also an income machine, proudly announcing its 46th consecutive annual rise in dividends. The proposed total dividend for the year is 9.85p per share, up 2.6% on the previous year. Despite global economic uncertainty, the board is planning another inflation-busting dividend increase in 2017.
Manager Paul Niven is positive about the prospects for the global economy, noting signs of improvement in corporate earnings for the first time in several years. “Recession is not a serious risk yet and animal spirits have still to be unleashed suggesting that this year could, once again, provide scope for considerable surprises,” he said.
The trust currently yields 1.66%, which ain’t great so let’s hope for another 46 years of progression. It is trading at a discount to net asset value, currently minus 7.43%, which gives you something of a cushion. Performance is second quartile over one year and top quartile over three years, according to Trustnet.com. The annual charge is 0.79%.
I would also suggest you look at another long-standing global investment trust, the £4.67bn Scottish Mortgage Investment Trust, launched in 1909. This returned 177% over the last five years and has just secured a berth in the FTSE 100. Foreign & Colonial grew 112% over the same period and lingers in the FTSE 250. You could always buy them both.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.