Well diversified portfolio: F&C Investment Trust

FCIT’s well-diversified portfolio should enable it to capture returns across multiple scenarios…by Jean-Baptiste Andrieux

Overview

 
F&C Investment Trust (FCIT) has been the best performing constituent of the AIC Global sector over the past five years (to 13/03/2026), with its well-diversified Portfolio across regions, sectors, and investment styles having enabled it to adapt more effectively to rapidly changing market environments than many of its peers. However, the trust has lagged its benchmark, the FTSE All-World Index, over the same period, as particularly concentrated market returns in a few AI-related stocks — notably in 2023 and 2024 — made it difficult for active strategies to outperform.

During the trust’s FY 2025 (ended 31/12/2025), manager Paul Niven, who oversees the strategic and tactical allocation, increased the weight to emerging markets equities, expecting their outperformance of developed markets to continue, supported by tailwinds such as a weaker US dollar, lower US interest rates, and attractive valuations. As discussed in our previous note, Paul appointed Invesco in March 2025 to manage FCIT’s emerging markets portfolio, and this change has proved rewarding so far, with the portfolio having outperformed its regional benchmark last year. On balance, however, FCIT was a net seller of equities in FY 2025, partly to fund share buybacks. Most of the sales involved US equities, although Paul remains constructive on them, highlighting their track record of delivering superior earnings growth relative to other regions. That said, he expects market returns to continue broadening beyond the US.

In addition, the trust has increased its Dividend for 55 consecutive years. For FY 2025, the board is proposing a final dividend of 5.2p to be approved at the annual general meeting on 29/04/2026. This would bring the total dividend for the year to 16.6p, representing a 6.4% year-on-year rise and resulting in a prospective yield of c. 1.4%.

Analyst’s View

In our view, FCIT’s outperformance of its average sector peer across multiple timeframes highlights the merits of a well-diversified approach. This means that the trust should be able to participate in market upsides regardless of which investment style, region, or sector is in favour. It may also help prevent the portfolio from being overly penalised when market sentiment turns sour on specific themes or names, compared with concentrated, high-conviction strategies.

In addition, we believe Paul’s ability to tilt the portfolio based on his outlook can help allow FCIT to adapt to rapidly shifting market environments more effectively than strategies applying a purely bottom-up approach. That said, the high concentration of market returns over the past five years has made it difficult for active strategies to outperform, and FCIT has been no exception. We think that the recent sell-off in mega-cap tech stocks due to their AI spend and flat returns for expensive NVIDIA shares since last August means this period could be coming to an end, which is creating a much more favourable environment for active strategies like FCIT.

We think FCIT is an attractive strategy for investors seeking core exposure to growth assets, with the trust also holding a small allocation to private equities. This differentiates the trust from many of its sector peers and enhances portfolio diversification. While private equities have struggled since 2022, they have historically outperformed listed equities over the long term, and signs of recovery have begun to emerge.

Finally, we believe the trust’s 55-year track record of annual dividend increases adds to its appeal. FCIT benefits from strong revenue and distributable capital reserves, meaning the board should have the capacity to support further dividend increases in the years to come, including in the event of an economic downturn.
 

Bull