This interview is part of our Big 12 series on the biggest investment trusts. Read the previous instalment with Alliance Witan here. 

Paul Niven is playing it cool when it comes to his US exposure, as he guides his behemoth F&C (FCIT ) investment trust through global markets upended by the rapidly changing whims of Donald Trump.

It is not by making snap decisions that Columbia Threadneedle fund manager Niven’s £5.3bn portfolio has outperformed its FTSE All-World benchmark over one, three and five, and 10 years. In the latest annual results for 2024, Niven and his multi-asset team grew the portfolio’s net asset value (NAV) by 21% versus a 19.3% increase in the index, despite an underweight to the previously unstoppable ‘Magnificent Seven’ stocks.

Further cementing the fund’s reputation as a steady vessel is its impressive 54 years of consecutive dividend increases, the latest of which took the annual payout to 15.6p. Just four other trusts have a longer such track record: City of London (CTY ), Bankers (BNKR ), Alliance Witan (ALW ), and Caledonia (CLDN ).

The FTSE 100 trust’s website boasts that its approach to investing hasn’t changed since it was launched in 1868, as it aims to deliver ‘steady, long-term capital growth and a healthy dividend income’. And since Niven took charge in 2014 – he is just one of three managers to run the fund since 1969 – he has continued to adhere to the mantra.

That isn’t to say that he doesn’t get thrown off course by the vagaries of the global economy and markets, and the current levels of volatility are some of the worst in recent years after US president Donald Trump brought in a swathe of punitive trade tariffs.

‘The last couple of weeks have been very difficult in the sense that the economy and market outcomes have been subject to the decisions of one administration, and one individual,’ Niven told Citywire.

‘Taking a market view on the outcome when, frankly, the personality of that individual and their plan changes daily is nigh on impossible.’

Instead of trying to second-guess Trump’s next move, Niven is focusing on the ‘fundamentals, valuation, and behaviours’ of the market.

Fundamental focus

Breaking that down, the fundamentals concern the outlook for the corporate sector and economy, and whether the ‘fundamental backdrop is positive from a growth rate and inflation perspective’. The valuation piece is what level the market is pricing stocks at and behaviour relates to ‘how the market is responding to greed and fear’.

‘In the last few weeks we have gone from an environment where the US was in good shape and, although the growth outlook for 2025 was slightly weak, the prospect for recession was low, with inflation moderating, not a lot of stagflation, and cuts in interest rates,’ said Niven.

‘Trump has now raised the risk significantly in regards to fundamentals. The recession risk is up, although that is not our central case.’

Speaking to Citywire in mid-April, Niven said the backdrop was worse than ‘two to three weeks ago’ as the 10% trade levies Trump brought in initially are perceived to be the ‘floor’ not the ceiling, even outside China where the US has engaged in a tit-for-tat tariff exchange.

The US policy outlook remains uncertain, and this will affect the American growth outlook as uncertainty is kryptonite for business investment and consumer spending, said Niven. ‘I do not think we are at the point where the US will tip into recession,’ he added. 

US shift

Practically, Niven has reduced exposure to the US – although his largest regional exposure remains to North America at around 60%.

‘We reduced US equities and emerging markets in the first quarter, by a combined £45m,’ he said. ‘And we made a modest reduction in the US immediately after the announcement of tariffs.’

That is a natural extension of a rotation that was happening pre-‘liberation day’ on 2 April, and Niven said the US was already beginning to underperform before Trump kickstarted tariff turmoil.

‘It is difficult to be definitive but there is a case to be made for saying that the period of US exceptionalism and extreme US outperformance that persisted for many years is potentially at an end,’ he said.

Although the US has been supported by good growth prospects, even before the ‘tariff debacle there were clear signs that the gap between the US and the rest of the world was narrowing’, Niven added.

The dramatic recent volatility is also ‘not typical of a high-quality market like the US’ and Niven says we are ‘facing the prospect of a sustainable shift in terms of performance’, though any such shift will not be a ‘binary’ given the US has ‘pre-imminent global companies’ listed there.

The most prominent of those companies are the Mag Seven tech stocks, of which Apple remains the largest.

Ultimately, the US does still ‘look positive’, said Niven, and the key will be diversifying to take advantage of the recent broadening out of returns and ‘making the right strategic decisions’.

While Niven oversees overall asset allocation and strategy, stock selection is delegated to underlying fund managers, mostly in-house at Columbia Threadneedle. 

Routes to growth

Diversification may be key to keeping the giant FCIT’s portfolio net asset value growing – even if the market cap hasn’t kept pace at £4.9bn, putting the shares at a 7.8% discount – but the board apparently isn’t adverse to growing the fund in other ways.

The mega-merger that minted Alliance Witan (ALW ) created a trust almost equal in size to FCIT, but there are still plenty of smaller portfolios looking for a consolidation opportunity.

Niven said there were both organic and ‘other avenues’ to growth for the trust. ‘I think the board is open to opportunities that would be value-adding for shareholders and it is open-minded about potential other routes,’ he said.