It’s 150 years since the launch of the world’s first collective investment fund, Foreign & Colonial Investment Trust. We look back at its history and highlight other funds in the 100 Club.
Why is this important?
It’s a story about the democratisation and de-risking of investing for ordinary people who wanted to save for their futures. The trust represented a step-change in the way individuals could access the stockmarket. It was the forerunner for the thousands of pooled investment vehicles, such as investment trusts and their open-ended fund cousins, that exist today.
But while 150 years ago you needed to have large capital sums to buy investments, today, with as little as £50 – or sometimes £25 – you can buy shares in an investment trust or units in an open-ended fund.
Your money is pooled with other investors’ money, giving you exposure to hundreds or even thousands of investments.
The trust was established on 19 March 1868 with the purpose of “bringing stockmarket investing to those of moderate means”. Initial investments in Foreign & Colonial (F&C) Investment Trust (FRCL) ranged from as little as £100 to as much as £50,000.
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In 1868 – a time when one old penny would buy a loaf of bread – £100 still represented a substantial savings pot and, for many, it was likely to represent their entire life’s savings.
A typical page of the shareholders’ register in the early 1880s includes an earl, a farmer, a “married woman”, a leather cutter, an army officer and a flax spinner. And these investors came from all over the land, from Devon to Edinburgh, from castles to terraced houses.
John Newlands, founder of consultancy firm Newlands Fund Research, an expert on investment companies and their history, says: “For any company to have traded, survived and grown for 150 years is a rare and indeed a stunning achievement, especially when the financial sector is sometimes accused of short-term thinking.”
How has investing changed since 1868?
The initial portfolio was made up of 18 “foreign and colonial” government bonds from Europe (Austria, Italy, Portugal, Prussia, Russia, Spain), Canada, South America (Argentina, Brazil, Chile, Peru), the Middle East (Egypt, Turkey), the USA, and New Zealand.
In the 1890s, the trust introduced exposure to corporate bonds and mortgages, and in the 1920s equities were added.
F&C Investment Trust’s first recorded purchase of an ordinary share was Shell Transport & Trading in 1925. Ninety years later, this company is still in the portfolio as Royal Dutch Shell (RDSB).
A glance at the companies that the trust invests in today shows how the financial landscape has transformed over the years. Alongside giants including BP (BP.) and Unilever (ULVR) sit powerful newcomers such as Amazon (AMZN), Facebook (FB)and Netflix (NFLX), and rising star companies in developing markets.
Is F&C Investment Trust still relevant today?
We think the F&C Investment Trust could make a good basis for a global diversified portfolio. It is a standalone fund that could cover all your investment needs, given the different portfolios within it.
Today’s portfolio gives investors exposure to 500 stocks around the world and the trust ranks ninth in the list of best performing global investment trusts over the past fi ve years to 1 February 2018, according to data from the Association of Investment Companies (AIC).
Its charges are cheaper than the average at 0.54% a year. However, the dividend yield is relatively low at 1.6%, which makes it less attractive to income investors.
What is an investment trust?
Investment trusts, also known as investment companies, are companies that trade on the stockmarket – but their business is investing on behalf of their shareholders.
Investment trusts can be riskier than open-ended funds because their shares can trade at a premium or discount to the value of the assets they hold, known as the net asset value (NAV) [the difference between the price of the trust’s shares and the value of its underlying assets].
But over long time periods, their performance records are often much better than open-ended funds.
Over 35 years to the end of December 2017, an investment in the average investment company is up 5,662% in comparison to 2,824% for open-ended funds, according to the Association of Investment Companies.
This article was first published by our sister magazine Moneywise, available online here.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company’s or index name highlighted in the article.