Foreign and Colonial AGM
Posted: April 26th, 2017, 1:19 pm
I spent a few pleasant hours yesterday at the AGM of Foreign and Colonial Investment Trust (FRCL). The trust is the oldest in the world and will be celebrating its 150th anniversary next year.
Paul Niven, the fund manager, gave a presentation highlighting the volatility/reward chart of FRCL as regards its peers e.g. Alliance, Witan, Scottish Mortgage and Bankers. FRCL was near the top of the reward axis whilst being near the bottom of the volatility axis. He also said that the share buyback strategy is used to dampen volatility whilst adding value for long-term shareholders.
Paul laid out the facts clearly as regards the relative lack of performance compared to the benchmark (MSCI World Equity Index). FRCL has third party managers running portions of the portfolio e.g. T. Rowe in the USA. Most did not hit their targets. Paul emphasised that these managers have good long-term track records and should do better than passive index trackers - time will tell!
Private equity - forming about 10% of the trust, was mentioned. This will be managed in-house in the future, so reducing the high fees normally paid in this sector. The trust has recently taken advantage of low interest rates to secure10 year borrowings at historically low rates e.g. 3%.
A fully covered dividend was mentioned as was the intention to increase the dividend in real terms for 2017 and beyond. Currently, shares bought back are held in treasury. We were told by Simon Fraser, the chairman, that these will only be relisted if they trade at a premium. The ultimate aim is for the shares to trade at par value.
After the formal meeting ended, we were able to talk to the directors who were keen to know how the trust could be marketed to the general public. I suggested that a campaign could be launched in mainstream newspapers and online educating the average man or woman the benefits of investing in the trust - effectively a ready-made equity portfolio for the long term e.g. 20+ years which compounds at 8.8% per annum on average. I also mentioned using plain language and highlighting the perverse incentives of financial advisors e.g. to churn portfolios to earn fees.
Paul Niven, the fund manager, gave a presentation highlighting the volatility/reward chart of FRCL as regards its peers e.g. Alliance, Witan, Scottish Mortgage and Bankers. FRCL was near the top of the reward axis whilst being near the bottom of the volatility axis. He also said that the share buyback strategy is used to dampen volatility whilst adding value for long-term shareholders.
Paul laid out the facts clearly as regards the relative lack of performance compared to the benchmark (MSCI World Equity Index). FRCL has third party managers running portions of the portfolio e.g. T. Rowe in the USA. Most did not hit their targets. Paul emphasised that these managers have good long-term track records and should do better than passive index trackers - time will tell!
Private equity - forming about 10% of the trust, was mentioned. This will be managed in-house in the future, so reducing the high fees normally paid in this sector. The trust has recently taken advantage of low interest rates to secure10 year borrowings at historically low rates e.g. 3%.
A fully covered dividend was mentioned as was the intention to increase the dividend in real terms for 2017 and beyond. Currently, shares bought back are held in treasury. We were told by Simon Fraser, the chairman, that these will only be relisted if they trade at a premium. The ultimate aim is for the shares to trade at par value.
After the formal meeting ended, we were able to talk to the directors who were keen to know how the trust could be marketed to the general public. I suggested that a campaign could be launched in mainstream newspapers and online educating the average man or woman the benefits of investing in the trust - effectively a ready-made equity portfolio for the long term e.g. 20+ years which compounds at 8.8% per annum on average. I also mentioned using plain language and highlighting the perverse incentives of financial advisors e.g. to churn portfolios to earn fees.