F and c investment trust

talexuser

jamei305 wrote: »

seems to be a closet tracker to me.

ahead of FTSE World over 3, 5 and 10 years... not my definition of a tracker. See also #17.

jamei305

talexuser wrote: »

ahead of FTSE World over 3, 5 and 10 years... not my definition of a tracker. See also #17.

No, I said the NAV tracks the index, so any return above a tracker fund is due to the premium/discount. It appears "ahead of FTSE World" over 3, 5 and 10 years simply due to a premium opening up in 2014 and 2016. I note since June it has moved to a discount and so apparently unperformed the FTSE World since then. Who knows what will happen from now.

The argument that this make a sound investment because it outperforms a cheaper global tracker is flawed, because it's true only if you're happy to gamble on where sentiment takes the price in relation to the NAV - the underlying investments are a closet tracker.

talexuser

The sentiment leading to the premium or discount is the same as for any share in the market, so the "gamble" is the normal result for any active fund that manages to beat its index.

londoninvestor

talexuser wrote: »

The sentiment leading to the premium or discount is the same as for any share in the market, so the "gamble" is the normal result for any active fund that manages to beat its index.

The IT discount/premium is a second layer though isn't it? The return to the IT holder comes both from the change in NAV (which is driven by sentiment regarding the underlying stocks in the portfolio) and from the change in discount (which is driven by sentiment regarding the trust itself).

Whereas an OEIC trades at NAV, so it's only sentiment regarding the underlying stocks which is relevant to the return.

talexuser

Agreed entirely, I just think sentiment on the manager or trust is the same as rumours or profit forecasts which makes people buy/sell a stock at whatever price. The equivalent for the OEIC is how many people buy/sell it based on eg the manager/historical performance, though as you say it doesn't affect the price (though Woodford's woes as a distressed seller could well "discount" the price :eek:).

Sally57

jamei305 wrote: »

No, I said the NAV tracks the index, so any return above a tracker fund is due to the premium/discount. It appears "ahead of FTSE World" over 3, 5 and 10 years simply due to a premium opening up in 2014 and 2016. I note since June it has moved to a discount and so apparently unperformed the FTSE World since then. Who knows what will happen from now.

The argument that this make a sound investment because it outperforms a cheaper global tracker is flawed, because it's true only if you're happy to gamble on where sentiment takes the price in relation to the NAV - the underlying investments are a closet tracker.

It basically comes down to whether you want to hold a global tracker or have confidence in an IT that has continuously delivered for its happy clients over many, many years!
,

bowlhead99

jamei305 wrote: »

No, I said the NAV tracks the index, so any return above a tracker fund is due to the premium/discount. It appears "ahead of FTSE World" over 3, 5 and 10 years simply due to a premium opening up in 2014 and 2016. I note since June it has moved to a discount and so apparently unperformed the FTSE World since then. Who knows what will happen from now.

The NAV doesn't 'track the index' just because for calendar year 2018 the NAV movement of -3.3% happened to be the same as the index. Over long term periods it doesn't aspire to track the index nor seem to actually track the index, even if the NAV total return happened to end up at the same place as the index total return over certain selected time periods.

If you take the 400%+ 20-yr share price total return against the 300% FTSE World index return for the same time period, it's evident that the difference is not just 'due to a premium opening up'. The trust ended the period at about 5% discount. If the Trust had for example started that period at over 20% discount and ended at nil discount, you might have had a point. However, the trust did not start at such a large discount and is not currently on a nil discount or a premium, so the movement in discount does not account for the outperformance of the price against the index. The NAV growth itself is what accounts for the outperformance against the index, because the NAV is not simply tracking the index.

As an aside, you can see from their factsheet that over the last year to August the NAV total return had lagged the benchmark's total return by 3%, yet the NAV total return still exceeds the benchmark after fees over 5 years (and the benchmark has no fees), therefore the NAV must have outperformed in the earlier 4 years to still be ahead, so by definition the NAV does not 'track the index'.

The argument that this make a sound investment because it outperforms a cheaper global tracker is flawed, because it's true only if you're happy to gamble on where sentiment takes the price in relation to the NAV - the underlying investments are a closet tracker.

A 'closet tracker' is a somewhat derogatory term typically applied to a fund that allocates the money to constituents of the index's asset class in a way which deliberately gives a similar gross return as the index through thick and thin, for fear of departing too much from market returns, but then charges active management fees for delivering it, leading to a worse overall performance and justified criticism.

Whereas in this case the fund has used alternative asset classes (such as private equity, with all the cost that entails) and an actively managed set of exposures to global regions and market sectors, outperforming the index after all fees over multi-decade periods. Doesn't sound like a 'closet tracker' to me. Though, full disclosure, I don't hold it, so there are probably others who could give you a better commentary.

Alice_Holt

jamei305 wrote: »

...the NAV tracks the index, so any return above a tracker fund is due to the premium/discount....

The argument that this make a sound investment because it outperforms a cheaper global tracker is flawed, ...- the underlying investments are a closet tracker.

This statement shows an incorrect understanding of the constituent elements of F & C, as bh99 has so clearly explained.

"through a policy of investing primarily in an internationally diversified portfolio of publicly listed
equities, as well as unlisted securities and private equity, with the use of gearing."

https://www.bmogam.com/fandc-investment-trust/wp-content/uploads/2019/03/fcit-ar19-final.pdf

jamei305

Alice_Holt wrote: »

This statement shows an incorrect understanding of the constituent elements of F & C, as bh99 has so clearly explained.

"through a policy of investing primarily in an internationally diversified portfolio of publicly listed
equities, as well as unlisted securities and private equity, with the use of gearing."

https://www.bmogam.com/fandc-investment-trust/wp-content/uploads/2019/03/fcit-ar19-final.pdf

Yet despite the 7% allocation to PE and the gearing, in addition to the 450 stocks, the trust's NAV has failed to consistently outperform the benchmark index. You'd expect with such gearing and PE allocation, an active fund should be able to generate at least 1-2% outperformance per year on average, but no luck (NAV in green):




I suppose you could argue it's worth a punt now due to recently moving to a discount, but it's been at a discount for a long time - the recent premium was a blip in historical terms, perhaps caused by publicity over it's name change and history attracting more retail investors.

jamei305

Sally57 wrote: »

It basically comes down to whether you want to hold a global tracker or have confidence in an IT that has continuously delivered for its happy clients over many, many years!
,

The global stockmarkets have delivered for their happy investors over many, many years. If I am paying someone to try and do better than them, I'd want some indication they have a strategy that either has a chance of doing a lot better, or less chance of doing worse. FCIT doesn't seem to offer any upside, or downside protection, when compared to a global market tracker.