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2018: Industry celebrates 150 years of investment companies

15 January 2018

AIC launches campaign to celebrate strengths of investment companies in the 150th anniversary year of the first investment company.

This year is a special year for investment companies, as 2018 marks 150 years since the launch of the first investment company, Foreign & Colonial Investment Trust, in 1868. There are now 389 investment companies in existence and total assets under management reached a record high of £174.4 billion at the end of December 2017. Interestingly, Foreign & Colonial Investment Trust sought to raise just over £1 million at its launch*.

To celebrate 150 years of investment companies, the Association of Investment Companies (AIC) has launched a campaign to run in 2018 to celebrate the achievements of investment companies and has created a logo to highlight this work.

Investment companies’ strengths

Strong long-term performance

Investment companies have strong long-term performance and, with a history of 150 years, this is an opportunity to look beyond the usual time periods. Over 35 years to the end of December 2017, an investment in the average investment company is up 5,662% in comparison to 2,824% for open-ended funds.

A much-valued aspect of investment companies’ performance is their resilient dividend record. There are 21 dividend hero investment companies which have raised their dividends consecutively every year for twenty years or longer and four of these have raised their dividends for more than half a century.

Innovations

Investment companies are pioneers of investment and it’s an opportunity to celebrate the industry’s successful innovations. The first investment companies invested in US rail roads, natural resources and bonds. The investment company industry throughout its history has continued to adapt to meet investors’ needs and, in the last decade, the infrastructure, debt and property sectors have evolved to meet demand for income. The investment company industry has continued to invest in ground-breaking opportunities including technology, biotechnology and healthcare, emerging and frontier markets, private equity and venture capital.

Durability

The past 150 years has seen many highs and lows. These include two World Wars, the Great Depression, the tech boom (and bust), the split capital trust crisis and the global financial crisis to name a few. Whilst these were difficult times, 150 years of history demonstrates the strength and durability of the investment company structure, which is just as relevant for today’s investors.

Commenting on reaching this milestone Simon Fraser, Chairman of Foreign & Colonial Investment Trust, said: “The trust was established 150 years ago with the purpose of bringing the advantages of a pooled approach to investing to the investor of ‘moderate means’ and its objective is as true today as it was on the first day it was founded. The key to the trust’s success, having paid a dividend to shareholders in every year of its history and having increased dividends for 46 consecutive years, is that it has never stood still. It has continued to successfully evolve to ensure it remains relevant for investors of today.

“The development of Foreign & Colonial Investment Trust was truly innovative and has helped shape the investment industry today. Since its launch the closed-ended funds universe has grown substantially, with investment trusts now recognised as an ideal structure for those looking to make long-term investments.”

Paul Niven, Fund Manager of Foreign & Colonial Investment Trust, added: “Our recent move towards a more global focus represents another significant evolution for the trust. Diversification remains an important aspect of our approach and the trust continues to be a core growth holding for many shareholders. A diversified approach with investments in listed equities and unlisted private equity across different geographies, sectors and styles means that we are well placed to continue to deliver on our dual objectives of growth in both capital and income over the longer term.”

Ian Sayers, Chief Executive of the Association of Investment Companies said: “For 150 years investment companies have adapted to the world around them with one objective - to help investors meet their financial needs. It hasn’t always been easy but it’s a testament to the investment company industry that it continues to adapt to meet investors’ financial requirements. Investment companies continue to be the pioneers of the investment industry and remain just as relevant for today’s investor.”

John Newlands, expert on investment companies and their history said: “For any company to have traded, survived and grown for 150 years is a rare and indeed a stunning achievement, especially when the financial sector is sometimes accused of short-term thinking. In the case of Foreign & Colonial, the founders were determined to build in prudence, diligence and diversification from the start – in short, to give what was then a troubled and risky financial sector a good name.

“Those founding principles have been maintained ever since, in my view for one particular reason. The presence of a truly independent board of directors, which many other types of fund lack, has maintained shareholders’ interests at every stage in history. That is why all top-class investment companies, and not just Foreign & Colonial, remain just as potentially valid for private investors in 2018 as the original trust did in 1868.”

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Notes

  1. Source: Newlands, J. (1997). Put Not Your Trust In Money. 1st ed. London: The Association of Investment Trust Companies, p.13
  2. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 347 members and the industry has total assets of approximately £174 billion.
  3. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.

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Annabel Brodie-Smith
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