manager jeremy tigue increases holdings in the f&C investment trust to 500 to spread risk
Jeremy Tigue, head of investment trusts at F&C, said he has less conviction on the markets now than at any time over the past two years.
As a result, Tigue said he has raised the holdings in the Foreign & Colonial Investment Trust (FCIT) to around 500, in order to spread risk, as he believes there are no stocks or sector that are looking particularly attractive at present.
Tigue said: 'The key question at the moment is whether to remain in defensives as we did last year. We have started to gradually move some assets into cyclicals, like technology, media and telecommunications stocks, but not on an overall geographic basis.'
'We invested some into European telecoms but it is too early to be putting money back into UK and US TMTs, where valuations are still too high.'
Over the year to 31 December 2001, the NAV of FCIT fell by 15.4%, compared to a fall of 13.7% in its benchmark (40% FTSE All-Share and 60% FTSE World ex-UK).
The two causes of this slight underperformance relative to its benchmark, said Tigue, were due to marginally negative stock selection, such as having too much in Europe and not enough in the US, and the negative impact of gearing.
Tigue said: 'Over the year, the level of gearing has been around 7%-10%, and this was responsible for knocking 1% off NAV. However, all the debt is in short-term yen borrowings, which reduced the negative impact of gearing, as by borrowing a currency that is going down and investing in a currency (sterling) which is going up, we were able to gain £9m last year.'
Over the year to 31 December 2001, the retail shareholder base of FCIT rose from 63% to 71% and the largest institutional holder now has no more than 3% in the trust. Tigue said the target level of retail shareholders in FCIT is 80%, and although he does not think it will be at that level next year, he believes the trust won't have a problem reaching it.
Tigue added: 'To take the burden off the institutional shareholders we have been talking to, and doing more business with, intermediaries and private client stock brokers. We have been trying to widen the net of who invests in FCIT. The AITC's 'Its' campaign certainly helped our retail push and so have our saving plans.'
Looking ahead, Tigue said the US will recover this year and Europe will follow six to nine months later. He predicted the UK will continue to do well and said the biggest uncertainty remains Japan.
He said: 'Global share prices are high relative to company profit but the high amount of profit competition will hamper the ability of companies to increase profits. So, while there will be a recovery, it won't as strong as expected.'
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