Annabel Brodie-Smith: Time travelling with the F&C Investment Trust

Benjamin Disraeli was in power when the first investment trust launched

Imagine the lights on top of the Tardis flashing as it lands on 19 March 1868 in a dimly-lit Dickensian London street. The Doctor emerges as a horse and carriage rattles by and scurries off into the fog. He – or rather she – could have been on her way to meet Queen Victoria or the Prime Minister, Benjamin Disraeli, but she was actually on her way to meet Philip Rose who that day launched Foreign & Colonial Government Trust, the very first investment company.

F&C Investment Trust, as we know it today, was launched for private investors, “to provide the investor of moderate means the same advantage as the large capitalist”. Philip Rose achieved a lot in his life – he was a lawyer, financial adviser and philanthropist who set up the Royal Brompton Hospital because his clerk had tuberculosis. However, we remember Rose for setting up the very first investment company.

If the Doctor then went forward in time 150 years and landed at the National Museum of Scotland on 15 November 2018 she’d find herself at the Association of Investment Companies’ Scottish dinner, celebrating 150 years of investment companies. She’d find F&C Investment Trust is still a company meeting private investors’ long-term financial needs and has grown to more than £4bn.

The Doctor today would also find a vibrant investment company industry of £182bn in size with 400 investment companies investing in shares around the world but also new assets like property, private companies, debt and infrastructure. Well, perhaps not entirely new: the first investment companies invested in debt and infrastructure – notably, the US railroads and the emerging market of the day, the US – and 150 years later such investments are still very relevant.

Century-old investment companies

There are 23 investment companies in existence today over 100 years old. The second and third oldest investment companies are Dunedin Income Growth (145 years old) and Scottish American (144 years old) which are both Scottish. Their managers explained why they are still relevant for today’s investors.

Ben Ritchie, manager of Dunedin Income Growth Investment Trust (Digit), said: “Digit started life under Robert Fleming in the 1870s investing in North American railroad bonds. Today, close to 150 years later, it invests predominantly in UK equities. Our ambition remains to provide a compelling combination of capital and income growth to our investors using the natural advantages of the investment trust structure.”

James Dow, co-manager of Scottish American, said: “Investment companies like Scottish American have remained relevant for 150 years by remaining true to sound investment principles. In Scottish American’s case, our long-standing focus has been to invest in growing companies with robust cash flows which are overseen by boards with a strong commitment to paying dividends.”

Investment trusts in 2018

From the investment companies with the longest histories to the newest companies, it’s a testament to the investment company structure that it continues to meet investors’ financial requirements. This year 16 investment companies have launched raising £2.71bn, compared to 15 IPOs raising £2.49bn in the whole of 2017.

This year’s new companies have invested in a diverse range of assets ranging from UK small-caps and financial services technology to music royalties and Cuban property – and there are more launches in the pipeline. Notably, the Smithson Investment Trust was the biggest UK investment company launch ever, raising £822.5m to invest in global smaller companies. The closed-ended structure allows managers to pursue these types of long-term focused strategies without having to worry about redemptions.

As investment companies celebrate their 150th birthday they have adapted to the world around them with one objective: to meet investors’ needs. It’s good to see the industry thriving this year with assets reaching an all-time high and narrowing discounts reflecting strong investor demand. Performance remains strong with the average investment company returning 254% over the past 10 years, and four companies have raised dividends for more than 50 years in a row. Investment companies continue to be the pioneers of the investment industry and remain relevant for today’s investor and we hope they remain just as relevant for tomorrow’s investor.

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