F&C Managed Portfolio Trust reports that its income portfolio's (FMPI) net asset value (NAV) and share price total return grew 10 and 9.8 per cent respectively over the year to 31 May, against 7.5 per cent for its benchmark the FTSE All-Share. F&C Managed Portfolio's growth portfolio (FMPG) made NAV and share price total returns of 12.8 and 14 per cent.
The trust, which invests in other investment trusts rather than direct shares, also has a good long-term record, with the share price total return of both the income and growth shares beating the FTSE All-Share over one, three and five years, and the growth shares beating the FTSE World Index and AIC Global sector average over one, three and five years.
Performance
| 1-year share price return (%) | 3-year cumulative share price return (%) | 5-year cumulative share price return (%) | |
| F&C Managed Portfolio Growth Ord | 14.3 | 64.2 | 70.5 |
| F&C Managed Portfolio Income Ord | 7.5 | 49.9 | 57.7 |
| FTSE All Share TR GBP | 3.2 | 37.1 | 56.4 |
| FTSE World TR GBP | 10.1 | 48.2 | 69.9 |
| AIC Global sector average | 12.3 | 49.7 | 68.5 |
Source: Morningstar as at 29 July 2015
Strong contributors to performance included trusts focused on biotechnology and healthcare, with Swiss listed BB Biotech (BION:SWX) the highest riser in the income portfolio, and Biotech Growth Trust (BIOG)* and Worldwide Healthcare (WWH)* the best two in the growth portfolio. In recent years there have been an increased number of product approvals and a record number of products in clinical trials, while industry consolidation has picked up as large pharmaceutical companies acquire biotech firms to replenish their patent-expiring drug pipelines.
BB Biotech plans to list in London later this year.
F&C Managed Portfolio's income portfolio holds three investment trusts run by Invesco Perpetual's Mark Barnett: Edinburgh Investment Trust (EDIN), Keystone (KIT) and Perpetual Income & Growth (PLI)*, and also has the latter in the growth portfolio. Last year Peter Hewitt, manager of F&C Managed Portfolio, had been concerned that Mr Barnett might have too much money to run after taking on some of Neil Woodford's former funds, in addition to his own. But after a recent visit to Invesco's offices Mr Hewitt is persuaded that Mr Barnett and his team are very well organised, and says they have improved their resources with more staff so Mr Barnett can focus on the investments.
"Performance over the last 12 months was very good - the evidence is in the numbers," adds Mr Hewitt.
He has recently added Securities Trust of Scotland (STS) and Invesco Perpetual UK Smaller Companies (IPU). "In both cases the boards have said that to make these trusts more attractive they are going to increase the dividends, in part by taking these from capital," he says. "Invesco Perpetual UK Smaller Companies was yielding around 2.5 per cent but has moved up to around 4 per cent, while Securities Trust was yielding 3.1 per cent but should move up to over 4 per cent.
"I think the boards are being pro-active and using the investment trust structure sensibly."
Invesco Perpetual UK Smaller Companies' discount has narrowed over the past few months from between 10 and 15 per cent to around 5 per cent.
Mr Hewitt is optimistic on investment trusts invested in UK smaller companies and has invested in the initial public offerings of River & Mercantile UK Micro Cap Investment Company (RMMC) and Miton UK MicroCap (MINI) which target quoted companies with a market value of less than around £150m.
"Provided there is a supportive macro environment, which there is in the UK currently, valuations are particularly attractive and if stock selection is good then returns can be especially strong," says Mr Hewitt. "We have a benign environment in the UK which is good for corporate profit growth, and smaller companies are more exposed to the domestic environment. This is a higher risk area but the profits outlook is good over the next year or two."
Strategic Equity Capital (SEC) was added to the portfolio in the trust's last financial year and it also holds BlackRock Throgmorton Trust (THRG).
A trust that did not do so well was BlackRock World Mining (BRWM), which Mr Hewitt had added to the income portfolio in 2014. This has since been sold following BlackRock World Mining's write downs of royalty investments.
"We bought it at £4.50 a share after it had already fallen a good deal and initiated a new yield strategy, but sold it at about £3.60," says Mr Hewitt. "Things have gone from bad to worse with this trust which now trades at around 245p a share, so selling was a good decision. Things have not yet turned in the commodity markets so we have no direct holdings in commodity trusts, though are keeping an eye on announcements from BP (BP.) and Shell (RDSB), and the big miners."
Murray International (MYI)*, which is held in both the income and growth portfolios, was among the top five laggards in both with a 0.1 per cent total return fall over the year to 31 May, not helped by its exposure to Latin America. The trust has also had a difficult time over the past few years.
However, it has raised its dividend 5 per cent and currently yields about 5 per cent, and Mr Hewitt thinks that over the long-term the trust could do quite well, especially in an environment of rising rates.
