Yahoo Finance Manager of 150-year F&C Investment Trust: ‘The clock is ticking on Facebook and Amazon’
It is 150 years since Foreign & Colonial Investment Trust opened for business – and changed collective investing forever.
The original trust has survived the fall of the empire, two world wars and the Great Depression – and has raised its dividend every year since 1971. But the fund managed by Paul Niven today is a very different beast from the one that savers entrusted their money to in 1868.
Could you describe your approach to investing?
Our approach is diversifying, but on multiple levels. For the man on the street, providing a one-stop shop that blends concentrated approaches across a range of different areas makes sense. There’s this fashion for highly focused portfolios but it’s not always the case that “less is more”.
How do you run the fund?
I invest through, at the moment, 10 sub-funds. Some are run by BMO, our parent company, and others by third-party fund managers. They are given specific aspects to cover, which could be geographic or style.
For example, in the US we have one manager responsible for “growth” stocks and one for “value” stocks. These are then complemented by managers who cover European stocks, global strategies that focus on smaller companies, Japan, and so on.
You invest in more than 500 stocks. How can you have oversight?
I can’t know everything about all those companies. We think it’s best to delegate responsibility for stock picking to individual specialists.
There are two extremes. One is to say that those managers should be left to run because they’re the experts. The other is thinking you can do everything: you make every decision and own it.
If the boundary of your knowledge is 30 or 50 stocks, you’re constraining yourself and you’ll end up with biases. The optimal approach is somewhere in between.
Which regions or investing styles do you like at the moment?
This year is looking good for growth, earnings and inflation. We’re on a pretty sturdy footing globally.
Outside the UK there is muted inflation – it’s a reasonably good backdrop for stocks, there are not many clouds on the horizon. For the first time on record the S&P 500 [the benchmark US index] has registered 12 consecutive monthly gains.
Volatility is at exceptionally low levels, so investors might well feel complacent and there’s not much on the horizon to change that view. That better growth environment means the global economy is probably less US-centric than it has been in the past.
Other markets should do better, so we have about 20pc in Europe, which we think will perform well, and we’ve increased our exposure to Japan. And even though emerging markets performed very well last year, we think they will continue to outperform.
What’s your biggest bet?
Financial services is the largest sector, the US is the largest geographic area, but our top 10 holdings include Amazon and Facebook.
We don’t have a significant bet – those technology stocks that have led the market will continue to do well but as we progress through the bull market I think we’ll reach a point of excess there. Changing central bank policy could also lead to higher volatility in markets.
That does not mean the bull market is over but things will change. With those stocks that have done very well, you could make a good case that they’ll reach a valuation that becomes more difficult to justify.
What has been your best investment?
The best-performing strategy has been that of our US growth manager, T Rowe Price. The biggest position was Amazon. When we appointed the manager about 10 years ago they bought it very quickly at around $25 (£18), so we’ve made about 50 times that on the stock.
And the worst?
We underestimated the extent of corporate earnings growth and we’ve been light on the US – that was a mistake. There have not been any blow-ups – reassuringly.
Have you invested in the trust?
Yes, my family and I have shares currently worth about £900,000.
How are you remunerated?
I get a salary, a cash bonus and deferred stock in BMO. I am paid according to performance and contribution to the business.
And if you weren’t a fund manager?
My interest was always in finance. But if I had the talent I’d be a tennis player.
