F&C Investment Trust (FCIT, 338.4p) - from Investment Trust Newsletter, September 2026
Written by Andrew McHattie, Editor, Investment Trust Newsletter; originally published in September 2026 and sent directly to subscribers
FCIT, the grandfather of the sector and a stalwart of many portfolios, announced its interim results for the six months to 30th June showing a 12.4% NAV total return, just behind its benchmark index, up by 12.6% over the period. That looks a credible return to us in view of the narrow leadership of the AI-dominated stocks over that period. The trust’s manager, Paul Niven, who has been responsible for the portfolio since 2014, provided a detailed update and his outlook for global equity markets for the second half of 2026.
The story of the portfolio in the first half was really one of volatility and a wide dispersion of returns. There were some big gains, and Paul said that several holdings doubled or trebled in value. Big contributors to the return included Applied Materials, SK Hynix, and ASML, but the trust also missed out on some of the really dramatic performers in global markets such as SanDisk, Micron, and Intel. AI infrastructure spending was obviously a major driver of markets, and there was notable rotation away from the ‘Mag 7’ stocks that had previously been so much to the fore. The Mag 7 actually underperformed market indices in the first half of the year, with some losing value. In addition to its main listed equity holdings, FCIT has a private equity portfolio including a holding in The Schiehallion Fund (MNTN, US$2.175), accounting for 10.9% of the total. It gained 9% during the period – a decent contribution, though behind the listed market returns.
All areas actually contributed positively in the first six months, although North America and Europe lagged. In the US, value delivered better returns than growth, validating the tilt that Paul has been making in that direction. He says the trust has been selling US equities, both last year and in the first half of 2026, reinvesting mainly in emerging markets. Exceptionally, the trust also added some US and emerging market exposure using futures contracts at the outset of the US-Iran war, which has proven a profitable trade to date. There were no manager changes in the period though. FCIT employs a blend of its own management under Columbia Threadneedle with specialist managers in certain areas, including Pantheon (venture capital), JPMorgan (US growth), Barrow Hanley (US value), and Invesco (emerging markets).
FCIT has a real in-built tailwind that is not always acknowledged as fully as it could be. The trust has loaded up with cheap debt and has a total of £620m of debt available at an average cost of 2.6%, which means that it can really use gearing profitably. It added 0.7% to performance in the first half and should continue to do so for many years into the future. This is one aspect of the trust that has helped it to maintain a strong position in its global growth peer group, in the top three over all periods. Paul says the trust is looking for consistent returns from a well diversified portfolio that is well positioned to capture the returns from a wide range of opportunities. In markets that are currently producing such a diverse range of individual stock outcomes, that looks very sensible.
Moving on to the macroeconomic outlook, Paul believes that oil prices will likely remain higher than their pre-conflict levels, with ongoing disruption and the need to rebuild inventories, but also thinks that both sides will be incentivised to reach a resolution. He sees the US as in a weak position and therefore unlikely to extend the war unnecessarily. This market uncertainty could be removed, which would be helpful. And otherwise, the backdrop looks supportive, with inflation largely under control, bond markets having discounted a fairly pessimistic view on interest rates, and earnings growth looking very strong. Paul pointed to the huge upgrades to 2026 earnings estimates, calling them “very unusual.” These earnings upgrades have been driving equity markets higher, with particular progress from energy and technology.
The powerful rally in semiconductor stocks – partly reversed in July – concentrated in the markets of Korea and Taiwan, is difficult to ignore. The trust did have around 18% of its ‘global focus’ basket in semiconductor stocks but has now reduced this to around 10%, taking roughly a third of the position out. Paul says this exposure will be actively managed, but he is still “constructive” on the AI theme. He sees some good value after the setbacks, highlighting the low valuation on SK Hynix of just 4-5x earnings on its forward multiple. The question is really about how stable the future earnings will be, and whether the current position is just an unsustainable spike. Elsewhere, equity markets are generally “not cheap”, Paul says, particularly in the US, on a forward PE ratio of 19.9x, but they do look more appealing in emerging markets where “a lot of heat came out” in July. Whilst there are risks from geopolitics, Paul says the outlook for equities will generally be supported by the earnings backdrop, and he sees scope for positive surprises from interest rate expectations, which he says “may be a bit too bearish at present.” The trust will remain focused on growth assets, while also delivering reliable dividends to shareholders. The board has already indicated an increase for 2026, making this year the 56th consecutive year for dividend increases.
Overall, this was a positive update from Paul Niven, who spoke about the unusual growth in earnings forecasts and the growing opportunities in emerging markets, taking up the slack as US equities have started to underperform. FCIT continues to position itself broadly to ensure it is capturing global growth opportunities, wherever they happen to be, and we think most shareholders will be very content with its performance over recent time periods. We think it is a SOLID CORE HOLDING in the global sector.
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