Private equity shields Tigue's F&C IT in 'difficult' year

Jeremy Tigue's exposure to private equity helped shield his £2.05 billion Foreign & Colonial Investment Trust from the full impact of a 'difficult' 2011.

The trust's share price fell 6.8% over the year ended 31 December, while the vehicle's net asset value (NAV) total return dropped 4.8%.  This is compared to a fall of 5.1% by Tigue's benchmark over the same stretch - a period which saw equity markets hit by severe turbulence during the summer as well as problems linked to the eurozone, which damaged investor sentiment and share prices.

'The biggest positive influence on our performance was our private equity portfolio,' investors in the established global growth trust were told as the company unveiled its results this morning.

The value of F&C's private equity portfolio rose by 13.8% over the period as the underlying companies within it produced strong results.

Cash distributions from F&C's private equity portfolio also helped boost the trust's bottom line. These more than doubled to £66.9 million and in September the trust reached an important milestone when for the first time the cash distributions exceeded cash being invested.

Stock selection in the US and Europe performed particularly well in F&C's private equity portfolio. The US performed better than all other markets, while emerging markets endured a very poor year, with Brazil ending 2011 as the worst overall performer.

Tigue also benefited from a well timed increase in his trust's gearing when investors were cautious during the late summer.

Years of pain

Looking to the future, F&C chairman Simon Fraser warned investors that it could take years before markets have left the financial crisis behind, and as a result, growth will remain scarce and shares volatile.

Fraser said: 'Five years after the first signs of the global financial crisis it is clear that it will be many more years before its full impact has worked through economies and markets. As a result global economic growth will continue to be weaker and share prices more volatile than in the 1980s and 1990s.

He continued: 'For 2012 itself, the issues we are most concerned about are the problems of the eurozone, the risk of a sharp slowdown in China, political uncertainty in the Middle East, the US presidential election and continuing imbalances in the global economy.