The world’s first investment trust is set to enter the FTSE 100, joining Scottish Mortgage Investment Trust, Pershing Square Holdings and 3i.
It will mark the first time there has been four investment trusts in the blue chip index.
F&C Investment Trust was launched in 1868 and is run by Paul Niven of Columbia Threadneedle Investments. The trust invests globally primarily via underlying funds.
Nick Wood, head of fund research at Quilter Cheviot, says of F&C Investment Trust: “It has been a stalwart with those looking for a consistent stream of income and has become somewhat of a dividend hero, having raised its dividend continuously for over 50 years.
“Whilst the FTSE 100 has returned around 9% for the three years to the end of July, F&C has returned 26% over that period. However, despite returns being ahead of its future index home in recent years, investors should bear in mind that F&C has exposure to some areas that have done well over the years but have struggled in 2022, such as US technology firms.
“These areas may take advantage of long-term structural trends but in the period of rising interest rates we are currently going through, their valuations can become increasingly challenged. With the outlook remaining cloudy in this regard, we could see additional volatility for F&C as it enters the blue-chip index.”
Wood says that while joining the FTSE 100 can bring profile and drive additional buying activity, it cannot guarantee strong performance and says investors should shy away from viewing F&C as a potential investment simply on its entry into the FTSE 100.
Looking ahead, Wood says it “may not be long” before further investment trusts join the index.
Wood says: “Among the next twenty or so largest companies, six are investment trusts, including a number of infrastructure and renewable trusts such as International Public Partnerships, Greencoat UK Wind, The Renewables Infrastructure Group and HICL Infrastructure. According to Numis, those four investment trusts have raised a staggering £2.9bn in the last three years. This demand from investors remains strong, and that alone may see the trusts move up to the FTSE 100 in due course.”
According to Wood, the shift may drive interest among funds managers investing in UK equities, who have largely avoided investment trusts to date.
Wood adds: “Passive vehicles will also continue to add to their weighting, assuming investment trusts are part of their remit, and thus we could see share prices be supported by these ‘forced’ buyers. It also reflects the ongoing change we are seeing in the UK stock market as a whole, and a combination of overseas acquisition of larger companies, as well as the greater focus on lower growth companies we have today.”
On the same day abrdn was demoted from the FTSE 100 to the FTSE 250, as it had slipped to 118th place based on closing price on 30th August.
