Niven continues: "We have reinvested into a number of areas but focused on US large cap value, global income stocks as well as continuing to make commitments to private equity.
"Third, we divested in entirety from global smaller company stocks. Fourth, we further reduced a long sterling hedge on the portfolio. This had been around £300mn at the start of 2021, was £200mn at the start of 2022 and was around £30mn at the end of the first half. These sales of sterling took place before the marked fall down to multi-year lows.”
Mick Gilligan, who runs the model portfolio service at Killik and Co, says the trust’s size has enabled the costs to be kept low, while the global nature of the trust means it can be flexible.
He says he believes the share price has benefitted over recent months from investors anticipating the trust’s entry in the large cap index.
Gilligan adds: "Fixed costs such as directors' fees and audit fees are lower as a percentage of total assets and bid/offer spreads are lower. Another benefit of scale is the flexibility to buy back shares, which adds value for existing shareholders, without having to worry too much about the resultant shrinkage in the share count.
"F&C bought back 1.8 per cent of its equity last financial year. This added 0.1 per cent to total shareholder performance. While not significant in that particular year, it does help to offset costs and the company can buy back up to 15 per cent per financial year – something that small investment trusts are not able to do to the same extent.”
Investment trusts' buying back their own shares might be expected to boost the share price in the short term, but means the market cap of the trust shrinks, making it harder to attain a place in the FTSE 100.
But buying back its own shares to boost performance can also help in falling markets because if the cash used to buy back the shares had been deployed into equity markets the likelihood is it would have generated losses, whereas buying back the trust’s own shares generated the modest gain of 0.1 per cent referenced by Gilligan.
Ewan Lovett-Turner, head of investment trust research at Numis, says the ongoing charge of 0.54 is “low”, while the trust has also achieved 52 consecutive years of dividend growth, which makes it popular with retail investors.
That there is increased demand for the trust’s shares among retail investors is borne out by F&C being one of the top 10 most bought on the Interactive Investor platform, returning to that spot for the first time since 2020.