manager of F&C investment trust bullish about prospects for recovery
The Foreign & Colonial Investment Trust is positioning itself for an equity market recovery in the second half of the year.
Manager Jeremy Tigue is looking to take a more focused and aggressive stance and continue his policy of upping the gearing on the portfolio. The trust's net gearing position was 8% as of 1 August, against a Global Growth sector weighted average of just 2%.
Speaking after the release of the trust's interim results for the six months to 30 June, Tigue said an increase in gearing has boosted returns in the second quarter of 2003.
'The first 10 weeks of the year were pretty grim when the markets were falling but we used that time to increase our gearing and shift our exposure towards riskier areas such as Europe and emerging markets,' he said.
'So when the recovery came after 12 March, we had a lot of positives with rising markets, the benefit of gearing and increased exposure to the markets that were going up fastest. Within those markets, we also had good stock selection.'
The trust's net asset value (NAV) per share grew by 7.6% over the reporting period, with gains in Europe, Asia ex-Japan and Latin America providing much of the forward thrust.
Tigue plans to continue increasing gearing as the market consolidates after the post-Iraq war rally.
'We have already had the Baghdad bounce and we think the next few months will be spent bobbing around current levels,' he said.
'That is more likely to present buying opportunities than selling opportunities so I would expect the gearing to go up in the second half of the year.'
Tigue is moving away from the defensive holdings that have served him well over the past three years, towards stocks that will capture economic growth when it resumes.
The divided policy on the trust has also been altered. While the trust receives most of its income in the first half of the year, it has traditionally paid the larger part of the total dividend at the end of the year. To make the two payments more even, the interim dividend had been increased some 71% to 1.8p per share.
The final dividend is forecast at 1.85p, making a total dividend of 3.65p, up 4.3% from last year. The trust was trading at a discount of 11.1% to NAV on 1 August, slightly tighter than the sector weighted average of 11.7%.
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