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Foreign & Colonial delivers despite £2.3 million hit from BP
by Charlie Parker on Jul 30, 2010 at 07:41
The £1.6 billion trust has posted its results which show that for the first time its private equity portfolio has played a meaningful role in smoothing the returns delivered by volatile equity markets.
The trust outperformed the FTSE All Share over the six months to the end of June with a total return of -2.2% against the All-Share's loss of 6.2% and a loss in its own composite global index of 3.2%.
The trust is managed by veteran investor Jeremy Tigue from F&C Asset Management. Once again the biggest factor in driving the outperformance was Tigue's own asset allocation which added some 2.4% to returns. However stock selection was a positive contributor today - if only just - adding 0.1% to returns.
Yet for shareholders the perennial problem of the discount that will not close meant that the share price of the trust fell in line with the market cancelling out Tigue's outperformance over the period.
The trust's chairman, and former chief investment officer of Fidelity Investments, Simon Fraser said: 'The biggest single positive contributor to our results was our private equity portfolio. As we expected, valuations rose following the gains in listed markets since March 2009 and there was a pick-up in cash realisations after two quiet years.
'Following the reduction in our emerging markets exposure at the end of 2009 there were only minor changes in the portfolio.
'Our UK and European portfolios performed well relatively though our emerging markets portfolio had a tougher time.'
The trust's debt, or gearing, held Tigue back a little over the period. He increased gearing to 12.4% over the period, up from 7.4%. This took some 0.7% of the trust's total return and follows a number of years when the trust has remained over-geared during volatility.
Most of the listed portfolio in outsourced by Tigue to other F&C Asset Management fund managers. However, he has constantly stressed his willingness to use third-party managers if the in-house names do not perform.
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