A true, tall, tale of inspiration
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A true, tall, tale of inspiration

On Wednesday 13 March the Royal Society, the oldest scientific academy in continuous existence, published research showing how giant sequoias, more commonly known as redwood trees, were thriving in the UK. Introduced to Britain, from California, as seeds and seedlings in 1853, sequoias are now estimated to number around half a million in the UK and are growing at a rate nearly equivalent to those found in their native range1.

The story resonated because of its similarities with our own. Our Trust also has its origins in the 19th century. Launched in 1868, just 15 years after the sequoias first took root here, we are the world’s oldest collective investment scheme. And we too have thrived, £5.7 billion in asset under management (as of 31 January 2024) and 53 years of consecutive dividend growth. At the Trust’s inception, the aim was to bring the benefits of creative and responsible investing to a wider audience. That vision still sustains us today.

Concentration

At a fireside chat to discuss 2023 results, among the questions we received were some asking whether a more concentrated portfolio had been considered. The Trust is purposefully designed to be a one stop investment vehicle investing across both public and private markets, where a more balanced approach helps to ensure the Trust is not overly exposed to any particular risk or theme. A diversified portfolio is advantageous in the long run, and in particular during environments where style leadership rotates quickly, as we saw in 2022 and 2023.

The question was nonetheless a fair one. The runaway success of a very narrow cohort of US stocks, known widely as the ‘Magnificent 7’ is hard to escape. The returns from some of these stocks, notably Nvidia, has been nothing short of remarkable. We do hold these stocks in significant size. Indeed, all but Tesla feature in our top 10 holdings. But ours is an international portfolio of over 350 individual companies. Our listed exposure is a mix of established businesses, strong newcomers, and rising stars in both developed and developing/emerging markets.

With a concentrated portfolio you get extremes of performance, in both directions, with potentially elevated volatility, steeper drawdowns, and outsized positive or negative impact from individual holdings. If things go well, you can achieve extraordinary gains but equally, if they go badly, you can incur large losses that require even larger subsequent percentage gains to fully recover. The Magnificent 7 are delivering exceptional performance today but we live in a fast-changing environment. Elevated valuations in this part of the market, a heightened regulatory regime and public scrutiny of big tech companies are potential headwinds we need to keep in mind. For electric autos maker Tesla the rapid emergence of competition from Chinese electric vehicle manufacturers (notably BYD) is a challenge to monitor, with Apple also facing similar challenges around heightened Chinese competition, on top of ebbing innovation and lagging investment in AI capabilities versus peers.

Myriad of moving parts

Globally, 2024 is a very busy election year. The US, UK and India are among the more than 50 countries going to the polls2. And these elections are being held against the backdrop of simmering geopolitical conflicts. Elements of uncertainty are forever present. The politics changes, the conflicts change, the technology evolves but investing against the backdrop of multiple moving parts maintains.

Putting all your eggs in one basket is a bit like trying to time the market. It’s tempting but almost impossible to replicate time and again over a very long period. For this reason, we continue to believe that individually concentrated portfolios, blended together, offer a better ‘all-weather’ solution for our shareholders over the long-run.

Active versus passive

Active versus passive management is another topic high on the investment discussions agenda. Active management costs more than passive and with a tight concentration of stocks driving index returns at the prevailing time, it’s an obvious and valid matter. As with the question about concentration though, there are reasons, in our view, why active management has the edge over passive.

While exceptionally high returns are the gift of a narrow group of stocks presently, this will not always be the case and we expect a broadening in the sources of market return to resume in the medium term. In the meantime, whilst maintaining a diversified approach we have actively managed changes to our portfolio with the aim of accessing strategies best suited to our medium-term analysis of the market. We have moved our US large cap strategy from T. Rowe Price to JP Morgan following the departure of the strategy’s long-standing portfolio manager and our global equities strategy to the strong-performing Global Focus strategy managed by our colleague David Dudding. Like the sequoias, the dominant above ground biomass is just a part of the whole. Deep underneath those majestic canopies is a network of well-woven roots that holds the structure steady while the tree grows. So too with our Trust. Unlike a passive ‘set and forget’ asset allocation we engage in intense research to factor in changes to volatility, macroeconomic developments, divergences in regional performance and much more. This doesn’t mean we engage in frequent activity, but it does mean that we are always in a state of readiness to act should market conditions change, either according to our forecasts or unexpectedly. Additionally, the aim of our research is as much to mitigate potential sharp drawdowns as to identify new opportunities. For instance, in 2021 we took steps to meaningfully increase our exposure to value stocks whilst reducing large cap growth, prompted by rapid tightening from central banks, slowing growth and historically high equity multiples particularly in the growth segment of the market. Indeed 2022 saw significant dispersion in returns between highly valued growth stocks and more lowly rated value stocks, with global value stocks outperforming growth counterparts by the widest margin since 2000.

In for the long haul

Giant sequoias can grow up to 300 feet (90 metres) tall over their 3,000-year life span. If the F&C Investment Trust is still standing strong, growing investors’ capital and paying an income, covered by the Trust, in even another 156 years’ time, we’ll settle for that as our goal being accomplished.
29 March 2024
Paul Niven
Paul Niven
Head of Asset Allocation (EMEA)
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A true, tall, tale of inspiration

Important information

Capital at risk

 

© 2024 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

 

This financial promotion is issued for marketing and information purposes only by Columbia Threadneedle Investments in the UK.

 

F&C Investment Trust is an investment trust and its Ordinary Shares are traded on the main market of the London Stock Exchange.

 

English language copies of the key information document (KID) can be obtained from Columbia Threadneedle Investments, Exchange House, Primrose Street, London EC2A 2NY, telephone: Client Services on 0044 (0)20 7011 4444, email: [email protected] or electronically at www.columbiathreadneedle.com. Please read before taking any investment decision.

 

The information provided does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell or otherwise transact in the Funds. An investment may not be suitable for all investors and independent professional advice, including tax advice, should be sought where appropriate. The manager has the right to terminate the arrangements made for marketing.

 

FTSE International Limited (“FTSE”) © FTSE 2024. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

 

Financial promotions are issued for marketing and information purposes; in the United Kingdom by Columbia Threadneedle Management Limited, which is authorised and regulated by the Financial Conduct Authority; in the EEA by Columbia Threadneedle Netherlands B.V., which is regulated by the Dutch Authority for the Financial Markets (AFM); and in Switzerland by Columbia Threadneedle Management (Swiss) GmbH, acting as representative office of Columbia Threadneedle Management Limited. In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

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Important information

Capital at risk

 

© 2024 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

 

This financial promotion is issued for marketing and information purposes only by Columbia Threadneedle Investments in the UK.

 

F&C Investment Trust is an investment trust and its Ordinary Shares are traded on the main market of the London Stock Exchange.

 

English language copies of the key information document (KID) can be obtained from Columbia Threadneedle Investments, Exchange House, Primrose Street, London EC2A 2NY, telephone: Client Services on 0044 (0)20 7011 4444, email: [email protected] or electronically at www.columbiathreadneedle.com. Please read before taking any investment decision.

 

The information provided does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell or otherwise transact in the Funds. An investment may not be suitable for all investors and independent professional advice, including tax advice, should be sought where appropriate. The manager has the right to terminate the arrangements made for marketing.

 

FTSE International Limited (“FTSE”) © FTSE 2024. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

 

Financial promotions are issued for marketing and information purposes; in the United Kingdom by Columbia Threadneedle Management Limited, which is authorised and regulated by the Financial Conduct Authority; in the EEA by Columbia Threadneedle Netherlands B.V., which is regulated by the Dutch Authority for the Financial Markets (AFM); and in Switzerland by Columbia Threadneedle Management (Swiss) GmbH, acting as representative office of Columbia Threadneedle Management Limited. In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

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