F&C Investment Trust PLC (0XW.F) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the F&C Investment Trust fireside chat focusing on the annual results. Today, we have Beatrice Hollond, Chairman, Paul Niven, Fund Manager; and Steven Bell, Chief Economist. Throughout this recorded meeting, [Operator Instructions]. I'd now like to hand over to Chief Economist, Steven Bell.

Good afternoon. Good afternoon, and welcome, everybody, to this event. Now F&C Investment Trust has reached a right old age of 156 but it still embraces innovation. And that's what this is about, bringing our communications with you, the shareholders further into the 21st century. And that's particularly valuable for shareholders throughout the country. And indeed, throughout the world, who might not have the time or the ability to attend the several events that we hold here in London. And you have the opportunity today to put your questions directly to the senior people who are looking after your investment. With me are our distinguished Chairman Bea Hollond; and Paul Niven, one of the most highly respected and senior investors within Columbia Threadneedle Investments, who are, of course, the portfolio manager for the Trust. Now we're going to begin with Bea Hollond, who will set the scene and then hand over to Paul Niven, who will go through the results for 2023 in some detail. And then we'll open for your questions. Now here on my iPad, I can see that quite a few has been submitted already, but you can submit a question now, simply follow the simple instructions in the sandbox. And my job is to collect the questions and ensure that we get through as many as possible in the time available. So let's get going. And over to you, Bea.

Thanks, Steve. Good afternoon, everybody. I'm delighted to be involved in this event and be able to engage with our shareholders and prospective investors. While the financial results and the portfolio performance will be presented by Paul, I'd like to make a few remarks, which I hope will be relevant to shareholders in terms of our progress as a Board and as a Trust in delivering our objectives. With long-term results in mind, we continue to be the go-to solution for capital growth and income for the regular saver, outperforming our benchmark on an annualized basis over the last 10 years. It remains the ambition of the Board to deliver real rises in dividends for shareholders over the long term that are sustainable, and I'm therefore very pleased to report another rise in the proposed annual dividend, which will again be fully covered by our revenue. We've retained our position in the FTSE 100 index, which I believe strengthens our visibility and acknowledges our place in the U.K. investors portfolio. We strive to have a strong board who challenges, provokes, advisers and acts with the utmost integrity and responsibility. The composition of the Board is very important to ensure that there are experts across many different fields. We want diversity of thinking as well as knowledge. The Board's previous marketing expert was Francesca Ecsery, who retired during the year. So we're delighted to welcome Anu Chugh, who has achieved a successful career in marketing, leading numerous consumer brands, including being Chief Executive of Pukka Herbs until recently. This is a testament to our understanding as a Board of brand and consumer awareness. We continue to support the manager in highlighting what F&C stands for and what it offers to shareholders. I'm sorry to report that Tom Joy will step down from the Board on the 31st of March. He's accepted an opportunity to take on a new executive role, which precludes him from continuing as a Director of this company. We'll miss his considerable investment knowledge and experience in the global equity markets. The process to recruit the successor is very nearly concluded, and we expect to make an announcement at all shortly after the AGM. And lastly, before I hand over to Paul, in due course, shareholders will be able to apply for tickets to our bi-annual lecture called F&C Life, which this year will be around the theme, social change and future generations. It's a great event to hear from thought provoking speakers including our fund manager and mingle with other shareholders and learn more about the company. It will be on the 6th of June, and I really hope to see many of you there. Thank you very much. Over to you, Paul.

Thank you Bea. and good afternoon, everyone, this afternoon. It's great to be aware there are so many shareholders watching this event. So I'm going to spend the next 50 minutes or so running through the annual results from 2023. We obviously have post online our annual report, and that's got a lot of detail in there. So I'm going to touch on the highlights from last year. But again, there's a lot more detail that can be found online. Before we get going, there is some points with respect to investment risk as well as a grocery and historic performance that I should point out. But moving on to just a bit of context and background and to remind you of the history of F&C Investment Trust as Steven said, 156 years' worth of history thus far, the world's oldest investment trust. And as part of our 150th celebration a few years ago, we undertook a great deal of research about the background and history of the Trust. And we're pleased to say that the Trust has paid a dividend every single year since launch back in 1868 also the longest continually listed company in the U.K. And as Bea said, another dividend rise is planned for 2023. And that brings to 53 years the number of consecutive dividend rises, which we will have delivered. There's been a high level of consistency, I think, in terms of performance, which we'll talk about, but also in terms of management of the Trust. So I am the living manager in the last 50 years, and we've only had 3 actually since 1969. In recent decades, we have been investing in growth assets. We were 95% in equities by 1965 and a very long history of both equity investments compared to 1920s and private market investments we made for our first private investments in 1942. We've got substantial scale, so just under GBP 5 billion in terms of market cap with our net assets around GBP 5.2 billion at the end of January. And as Bea said, we are a 100 constituents, one of the largest listed companies in the U.K. In terms of our overall objectives and how we approach to deliver on those objectives. The overriding aim of the Trust is to deliver long-term growth in capital and income. And that's an important point, that long-term perspective. Our approach is very much focused on exposure to listed and unlisted global growth assets. What does that mean? Essentially, listed equity and private equity. And as we go through, I'll give you a sense about how we're invested in which areas we have exposure to. And the way that we approach investments is by blending a range of focused active strategies. So again, reflecting on B's comments, we look to provide essentially a one-stop shop for investors who are looking for a single portfolio that will provide them exposure to growth assets. So by diversifying across strategies, each of which is focused on a stand-alone basis, but by combining them, we hope to smooth the performance outcome for end shareholders and to provide an appropriate level of diversification, so adding risk while reducing return. We also have a commitment to a net zero carbon portfolio by 2050 or earlier. And there's a plan and trajectory against which we look to deliver against that outcome. And in terms of outcomes what we look to deliver for shareholders is consistency, consistency in terms of performance delivery but also value for money for shareholders, not again, as appointment of the board are very much focused on. So in terms of the highlights for the results for 2023. This slide here outlines some of the key points. Firstly, from a shareholder return perspective, we delivered a return of 8.1%. So it was a strong year in absolute terms. The underlying NAV, net asset value, total return was 11.3%. And the benchmark was higher still at 15.1%. Our discount widened in the year, starting at 3% and ending at 5.9%. And that difference in terms of moving from 3% to 5.9% explains the gap between the NAV total return of 11.3% and the shareholder return of 8.1%. In response to that widening in our discount, we bought in shares, buying back shares at a discount to net asset value is accretive, adds value for shareholders. So we bought back 8.6 million shares through buybacks during the year. It was a good year for net revenue return. It was up by 13.7% on the year. So our income was 15.83p that was a new high for us. In gross terms, we earned over GBP 100 million in income last year for the first time. And that led the Board to agree a proposal of an 8.9% rise in dividend for the year to GBP 14.7. So comparing that GBP 14.7 dividend against the revenue of GBP 15.83 million shows you that our dividend is covered again, i.e., we earned more than we plan to pay out, and that is the 53rd consecutive annual rise in dividends, which is proposed I'll talk about the underlying portfolio and what worked, what didn't work, but a key point was private equity, which has over the longer run, been an area of strength for us and provided excess returns against listed markets but last year, it did significantly lag very strong listed market returns, and that did detract from our NAV on the year. The other key point, just in terms of relative return contribution was an underweight exposure overall, not that significant, but given the magnitude of returns last year, actually, it had a meaningful impact in terms of our performance outcome, but an underweight exposure to those mega cap. Growth stocks in the U.S. is a very, very concentrated market last year and has thus far in 2024, continue to be relatively concentrated, and that was detrimental. So in other words, being underweight, those really highly performing large stocks in the U.S. on the equity portfolio did drag from our relative returns against the benchmark. On the point of value for money, I'm pleased to say that our ongoing charges fell down to 0.49%. That's down from 0.54% in 2022, and that continues a recent trend of the reduction in ongoing charges and that reflects again the value for money point. And that was helped by a reduced management fee with us as managers of the Trust. So again, scale of the product, the Trust bringing benefit through reduced charges. Just in a bit more detail, this slide decomposes the share price total return all the way over on the right-hand side there against the benchmark into component parts. So we run through this quickly left to right. So the underlying portfolio of investments where we have exposure to listed equity and to private equity delivered a return of 11.7% on the year. The two main reasons why we lagged that benchmark return, as I said, of 15.1% where our private equity in aggregate produced a return of minus 1.7% last year. So that was very meaningfully behind returns from listed equities and again, that was a drag. And the other point was that we were underweight to those large growth stocks that was also a detractor. In terms of quantifying the respective impact of those 2 variables, again, that GBP 11.7 million against 15.1%. There's around about a 3% geometric difference in between those 2 numbers, 2/3 of that was the private equity performance and around 1/3 was the under exposure to the megacap tech names. Gearing was additive so that added some value last year because we had borrowings which were then invested in a rising market that was additive to returns. We bought back stock, as I said, 8.6 million shares at a discount. Again, that added some value. There was a modest change in the fair value of our debt as a function of changes in market interest rates. It attracted very slightly. And then we've got management fees and interest and other expenses, which detracted. So you add up the $11.7 million with all those numbers, which follow from that, and that gives the NAV total return of 11.3%. As I said, we moved from a 3% discount to a 5.9% discount and that detracted 3.2% from shareholder total return, and that leads to the 8.1% share price total return. So that is a decomposition of return at high level on the Trust last year, strong year in absolute terms, obviously lagging a very an unexpectedly strong environment for listed equities. I'll spend a minute on this slide, which shows the point about having a range of different strategies in the portfolio, each of which is focused, but which are blended together to ensure diversification, hopefully adding return or reducing risk for and shareholders. So what we've got here is exposure to different strategies like U.S. growth, U.S. value and so on, all the way on the right-hand side there to cover private equity, which ended the year just over 11% of our total assets and private equity. I've also shown you what the start of your position was or been of 2022 and the end of year position, to give a sense about how the portfolio actually changed over that year, not into the stock level, but into the strategy level of consideration. There's a couple of points to draw out here. One, we had successfully, I think, navigated what had been really quite significant volatility in terms of growth in value stocks, growth stocks being highly rated or for one of the better or expensive stocks with high growth prospects and expectations against those that have lower valuations perhaps with lower growth expectations, particularly in the U.S. So we came into 2022 with actually an overweight position in U.S. value. U.S. value had meaningfully outperformed U.S. growth stocks in the prior year 2022. And as I said, we navigated what has been quite a volatile period in full 2021 and 2022 in terms of that growth value trade. In the very early part of the year, we actually made a few changes. We leveled up largely the exposure between growth and value given the outperformance which we'd seen from the value segment of the market, reducing the respective value gap between those 2 areas. And we thought it was perhaps going to be a less conducive environment in terms of the economic and fundamental backdrop for value stocks in 2023. So we leveled up exposure between those 2 areas. We also made a couple of other changes, most notably reducing and selling out actually in entirety of our long-standing U.S. growth manager, T Rowe Price and making a new commitment to JPMorgan, who now run that U.S. growth part of the portfolio. A couple of other points I would draw as well. Global Small Cap, an area that we used to have exposure to on the portfolio. We sold out of that a couple of years ago, it's obviously struggled in performance terms. We've continued with a 0 weighting there. And we incented a couple of new strategies actually global focus and global enhanced, both of which provide concentrated exposure to global equity around the case of global focus, global growth stocks run by Dave Dudding within Columbia Threadneedle and Global Enhanced, which basically looks to provide returns which are additive to the rest of the portfolio, which is run by our quantitative team within Colombia Threadneedle privacy reducing and allocation modestly on the year. So there's a few changes, most notably, I think, in the U.S. in terms of the over allocation between growth and value. In addition, we reduced cash levels on the year, and that led to a rise in gearing. We came into 2023, but actually not a particularly positive view in terms of the economic backdrop. And subsequently, as I'm four we'll discuss, we were positively surprised in response to that, cash levels were reduced through the year, and we ended up with a slightly higher gearing level from the end of December 23. A few words on revenue and dividends. I made some of these points already. But it was a really good year for revenue overall list this gives a snapshot over the last few years in terms of the progression in dividends. As I said, that proposal of GBP 14.7 dividend for '23 will be the 53rd consecutive rise. We've seen good progress in terms of revenue per share, which also hit the new high. And our revenue reserves, one of the great benefits of the investment trust structure is that in good times, we can put aside some of revenue that we don't pay out in dividends into revenue reserves that we can hold back in the event that we need to supplement our revenue shortfall to make a dividend payment. And we've got very substantial levels of revenue reserves around GBP 21 per share at the end of last year, which is GBP 17 million. So we're in a really strong position, I think, not only to meet the near-term expectations in terms of dividend growth but again, to Bell's point, that long-term aspiration to deliver rising dividends for shareholders over the long term. A couple of words on debt. Again, one of the advantages of the investment trust structures that we can borrow to invest, and we didn't undertake any new borrowings last year. But in prior years, we really took advantage of what was an incredible environment for borrowers looking in interest rates at extraordinarily low levels. And this gives a sense of what we've achieved there. So we've got around GBP 580 million worth of fixed street debt on the track -- this shows the split by mature much of that debt matures over the next 10 years, the next 20 years and so on. And the corresponding fixed interest rate that we [Technical Difficulty] bucket. So as an example, 30 to 40 years, we're paying at a blended rate of around 2.1% borrowings all the way out there. And in fact, a couple of years ago, we undertook borrowing out to 2061 at 1.87% fixed. So really low rates of interest that we pay on those borrowings down very substantially in recent years. And repeating the point I made a few moments ago, gearing levels rose over the year from 7.3% at the start to 9.9% at the end with debt at par. So there was a modest rise in going levels over the 12-month period. Sustainability and ESG responsible investing. This is a really important aspect that the Board and we, as investment managers consider. All the underlying managers in the Columbia Threadneedle signatures of UNPRI, Columbia Threadneedle were one of the finding signatures. We've got long heritage in terms of consideration of responsible investment issues. We've got a very, very well resourced team within Colombia Threadneedle, who undertake voting and engagement with companies into which we invest on our behalf. The Board made a commitment to a net 0 target, as I said, of the underlying portfolio by 2050 or earlier. So there is this trajectory, which we're on to meet-meet that overall objective. This slide here gives you a sense of some of the issues that we raised with companies across in this sense is 28 countries. And again, in the annual report, there's a few key studies that we've drawn out, which really bring to life, I think, some of the activity, which we are undertaking at the portfolio level in terms of engagement with the companies in which we invest on your behalf. Portfolio exposure. So reflecting on those strategies and when we put them all together and think about the overall portfolio exposure, in this case, on the left-hand side, including private equity, this gives a breakdown about how we're invested at the end of the year. So the majority, 57% or thereabouts of assets in North America, that is the majority of the minority of our investments are. Europe, 10.6% emerging markets, 8.6% and so on. So this is a decomposition of exposure, including private equity, as I said, private equity around about 11% of the portfolio at year-end. On the right-hand side here, this shows the breakdown of the sectoral exposure in terms of listed equities, so how much is in technology, consumer discretionary financials and so on. And again, we've talked about this long-term perspective. There are a number of key performance indicators outlined in the annual report, which show how we've delivered for shareholders in shareholder those return terms, in NAV terms, in dividend growth terms, over multiple time periods. So there's a lot of data you can look at in terms of what we've achieved for shareholders, and this is just one snapshot I've chosen to represent that long-term perspective and is inside over management with the portfolio, which was mid-2014. So that's almost 10 years ago. The left-hand chart here shows you performance of open-ended funds, EITCs and CCAs, which are an alternative investment medium for investors beyond investment trusts. They've lagged in medium terms, returns from a passive equivalent, which is the Vanguard ETF, which has, in turn, delivered returns broadly in line with the FTSE, all World Index, as you'd expect from a passive product. However, our NAV net asset value total return has exceeded that benchmark index and our share price total return has further exceeded that index. And again, the EITC median is how our returns in NAV and share price total return terms compare to our closed-ended competitors, i.e., other investment trust to invest into global equities. And on the discount, we were not so long ago trading at a premium, actually, and we have been issuing shares in recent years. We did, as I said, in the year around 6% or thereabouts discount widen the start of the year. But again, the Board remained focused on ensuring that they're doing the right thing for shareholders, and there's an active buyback program when the discount widens. In addition to that, I should say there are numerous other activities which we undertake to promote the Trust to shareholders because we do think that, that is a part of the remedial action, which is required in order to get the share price closer to underlying net asset value. Finally, a few comments just in terms of the outlook summary. The backdrop fundamentally for financial markets and the global economy is better, I think, it's fair to say, than we expected 12 months ago. Recession has been avoided in the U.S. thus far. We reduced cash raise gearing levels reflects a better fundamental backdrop. Interest rate cuts are likely to be forthcoming for major central banks, U.S. Federal Reserve, Bank of England, European Central Bank as we move through this year, probably around the middle of the year is most likely point around June when the first interest rate cuts may be implemented by U.S. Federal Reserve in particular. So easier policy, lower rates, that's good for financial markets typically. Equity markets, and there are some points we talked about this in due course. But active markets are not cheap. They're trading quite rich relative to history and valuation terms, driven predominantly by valuations in the U.S. that make mega-tech space of the market. But that is balanced against a better growth backdrop. And again, as I said, easier policy. We know there's going to be some big events coming later this year in terms of politics and elections not just in the U.K., but clearly in the U.S., that may lead to some volatility uncertainty. But again, I think it's counterbalanced by post the fundamental backdrop. At this point of valuation, I think we certainly have not reached levels of excess that we have seen in prior periods that some are pointing to is similar to now, i.e., the lens in the dot-com boom and subsequent bust. But I do think it's right and appropriate for us to offer balanced exposure to those growth stocks, which offer high prospects in terms of future returns, but also come with relatively high valuations against some areas of market in the value space. And for private equity, a disappointing year, we've got good long-term results from that area, and there are some signs of progress in terms of possible exits coming through, some movement in the private equity market, improving market sentiment. So we're hopeful that we will see a better return from that area in the portfolio as well looking forward.

I've been scrolling through the list of questions that you've submitted here. What I'm going to do is put as many of them together so we can get through. There may not be literally your questions if you're listening, but I'm going to put as many of them together. And there's several here about dividends, which have been referred to. And I put this to be, I think, what is your outlook for dividend growth? And is it sustainable? This is in the future?

So we are hoping, first of all, to, I think, as Paul said, pay an increased dividend this year, which has to go to our AGM, which is going to be an 8.9% increase. That means that over the last 1, 3, 5 and 10 years, we will have paid a real increase in dividend. The Board wants to be able to sustain that over the long run. It's not going to happen every year, clearly, it didn't happen in 2022 when inflation was very high, but we did pay a small increase then, and then we were able to pay a much larger increase this year because of the reserves at the income that had come in. And I think that as Paul alluded to, with our reserves, it means that in the years where it might not be much leaner years, we'll be able to hopefully continue to increase the dividend on an annual basis. We've done it for 53 years. As Paul said, we paid a dividend every year in 156 years of our history. And so we're hoping that we can continue that record.

There are several questions, which I put on the market outlook category. I'm going to put these to Paul. And one angle is we've had this magnificent 7 dominating global markets, they look a bit of a bubble. We've got all these geopolitical risks in Gaza, Ukraine and elsewhere, are you not a bit nervous? Is this not time to get a bit defensive with your portfolio?

So I think there's always uncertainty when one looks forward. There are always events and risks, which one has to consider in terms of the outlook. And I think you've highlighted some of the key ones this year and where we are today, the [indiscernible], phenomenal performance driven by a relatively narrow cohort of stocks and Nvidia continuing to deliver extraordinary returns year-to-date. And then politics later this year as well as obviously geopolitics and conflict. These are all valuations, politics, conflict create uncertainty potentially. And certainly, one has to be open-minded with respect to how events might change and what might unfold in the months and quarters ahead. And again, reflecting what I said just a few moments ago, but 12 months ago, I think one has to be humble in terms of one's ability to foresee the future and how things might change for better or indeed for worse. What I would say is that, firstly, valuation concerns. Again, I would subscribe our view that security markets are trading on the rich side of history. But I would not subscribe to a view that we are in bubble territory. And certainly, everyone wants to draw comparisons, again, with the late 90s, things got a lot more overblown in terms of valuation in the technology sector compared to what we see now. And Nvidia again, is a good example of that, drilling in a high multiple. But if one looks in forward earnings, it's trading in the mid-30s. Everyone looks at those. We are optimistic about realistic expectations for 12 months. So maybe the valuation is not quite as high or excess valuation is not quite as high as some people fear because these are real businesses delivering real high rates of growth and hopefully we'll grow into or relatively high levels of valuations. I think on the politics and geopolitics, we'll see how things unfold. Clearly, there's a big election in the U.S. come November. It may well be that Donald Trump gets back in. That will obviously be less of a surprise this time than last, more deregulation and really more concerns about Central Bank independents, if he gets into the White house. And he may well have his own agenda that he wishes to pursue in terms of issues to address in response to challenges he's faced in [indiscernible] perspective in recent and coming months. So there's a lot of uncertainty, but I think that from where I'm sitting, the fundamental backdrop of reasonable growth, declining interest rates and good liquidity and valuations, which are rich but not really that extended presents a reasonably favorable backdrop.

So I've got another question which links up to how you just ended there, which is there's a lot of talk about lower investment returns more generally in the years ahead. What do you think about that? And do you think it's getting harder for active managers to beat these indices?

So firstly, lower returns. All that being equal, higher valuations as a starting point, does historically tend to lead to lower returns going forward. But one has to take really a quite a long perspective for those historic results to be robust, i.e., you can have high valuations today, but it's really only in a 10-plus year view that confidence as to what those valuations might mean for returns, i.e., high valuations don't have much impact on 12 months, 2-year, 3-year returns they can get more expensive for sure, over the shorter-term horizons. But I think it is fair to say that high valuations should give rise at least a pause for thought for investors as to what prospective returns might be, and valuations are certainly relatively high compared to history in equities. Unless there is a fundamental change in terms of underlying productivity and a step change in corporate earnings growth, then I think it's fair to include the returns on a multiyear view are likely to be lower than those that we've enjoyed over the last 10, 15 years, which have really been quite exceptional compared to historic norms. On the point on active management, I think it's fair to say that it's been a really difficult environment in general for active managers in a very narrowly focused market. The narrower the market is and the less number of stocks that are really driving returns is for portfolio managers, active portfolio managed to keep piece unless they have significant positions in those holdings and overweight position to be able to deliver outperformance. The thing the consensus view is that there should be a broadening in terms of investment returns. It remains to be seen whether that actually unfolds or not often, the pain trade is more of the same, and that certainly would be a pain trade for I think most investors who won't be surprised if it continues to be a relatively narrow market. But it remains difficult for active managers. I think that is a fundamental reality. It's difficult to add value in what our efficient markets. The way that we approach that is concentrated portfolios run by specialists where we diversify across those different strategies again. So specialists but diversifying. So we're not spending too much risk on one particular sector, segment or particular outcome.

So I've got several questions here. It's been observed that discounts to net assets have been widening across the sector. And I think this should go to you Bea, what can the Board do to narrow that discount and improve the returns to shareholders?

I'll answer it quite quickly because I think that Paul already put some words to this. But first of all, share buybacks, we are actively buy back shares. We've asked Paul and his team to make sure that, that is done. So we are in the market whenever is necessary. And I think as the market knows that, they know that's a good thing for the shareholders. I think the other thing is that we also have tried very hard to raise the profile of the Trust in recent years. We've rebranded. We are looking to younger investors by advertising both on television, Sky, ITDs but more recently now on both TikTok and YouTube as well. And so I think those things are supposed to enhance and give us brand recognition, which means we should be the go-to investment trust for people when they're thinking about a global steady investment trust for them to purchase. And finally, I think performance is obviously key. The investment trust with good performance tend not to trade at very wide discount. And so one of the things we do as a Board is to challenge Paul and his team to make sure that they are performing well, which hasn't been too bad.

This one I think is for Paul. You've mentioned a couple of times the commitment to net 0. I've got one of your shareholders here accusing you -- well, not accusing you, but asking you about whether there's any green washing involved and whether that commitment to net 0 is constraining your investment, particularly to companies like Shell, which I think was your first equity investment. Not you personally, but the Trust.

That was before my time. And so I think firstly, this is a long-term commitment. This is a serious commitment. We've got very substantial resources, again, within the organization that we work with the Board to provide this road map that we look to work with underlying investee companies to ensure that they are meeting obligations that they should have to meet their own net 0 targets. We're not precluded for investing in the likes of Shell or BP today. In fact, in many respects, some of these large energy companies are going to be part of the solution, provided that they manage the transition well themselves. So we've had some specific areas of exclusion, which are the really carbon-intensive areas such as thermal coal, for example, we have some specific restrictions implemented. In terms of managing and against the constraints, again, the long-term objective is delivery of growth in capital and income. And over the last few years, we have navigated between expensive carbon-light stocks and cheaper carbon heavy stocks relatively successfully, I think. But over time, we expect the carbon intense of the portfolio to move down.

Do you engage with your investments directly about their own carbon strategy?

No, absolutely. That is a key part of the plan for us to hit our net 0 targets, is the underlying companies into which we can invest, do the right thing in terms of meeting their net 0 commitments. And then ultimately, decisions will have to be made with respect to companies that are not meeting obligations as we see fit. So again, this large team that we have within the organization, Columbia Threadneedle, we use extensively to engage with companies that may be seen as bad actors in terms of carbon intensity and ensure that they're on the right pathway.

As the share price, someone has asked is getting nearer to GBP 10. Are you thinking of doing a share split?

We absolutely think about this and consider it all the time. On the one hand, it might make sense for us to do it because if we have a lower share price, we can attract people that have only got a small amount of money to invest on a monthly basis through our savings plan, for example. But sometimes lower share price might have negative connotations in sense of value. In fact, it would be quite interesting if anybody wanted to give us the views online, we'd be very interested to hear what our current shareholders and potential investors think.

I've got several questions on the structure of the portfolio. I suppose I'll ask them separately. You have a large number of holdings with your different strategies in the fund. Are you concerned that this dilutes the performance? And would you be better off with a more concentrated portfolio of high conviction holdings?

It's a question that we discussed with the board again in terms of what we're looking to deliver on broad objectives. And if you think about what most of our shareholders want from us in terms of that delivering on long-term growth in capital and income and how we have positioned the Trust from a propositional perspective, it is to provide a portfolio which provides broadly diversified exposure across a range of different underlying segments of the market, geographically, sectorally as well as from a stock perspective, in order that the end shareholder has exposure to a range of underlying range of under components. So the one-stop shop principle, which I mentioned in investors info. One portfolio, which will give them exposure to global equities and private equity, we would like then to think about F&C. If we went down to a highly concentrated mandate and others in the market do this clearly. Then I don't think that personally fits the requirement that the end shareholder will typically expect from us, which is that single portfolio, which will deliver close to an all-weather solution for them, respecting that we're investing in equities. And again, the point of diversification and principal diversification is one that one can add returns while reducing risk, if you blend together components, which behave differently at different points in the cycle. So one can get extreme outcomes clearly on the upside and on the downside with concentrated portfolios, we look to provide a smoother performance outcome, and that's achieved through diversification. So I think the approach remains appropriate, concentrated portfolios blended together.

I've got a number of questions about private equity, which you point out has been a real winner for the Trust in the longer term, was not a winner last year. And are you concerned about the future prospects of private equity? And are you reconsidering the overall allocation?

So it's again, something that we've discussed at length with the Board and strategically, it's been a good area for investment for the Trust for many, many years, and we assess that formally by looking at the excess return or nor or private equity against listed equity. So because that's essentially an opportunity cost you get from public equity and patent private equity capital to private equity. And we've got a good experience there. I think in general terms that the environment is a harder one for private equity, given that we are coming off an era of extraordinarily cheap money or low interest rates into an environment where, obviously, inflation has been higher, interest rates have been raised. It's harder to not only get borrowing, but the cost of borrowing has risen and a lot of private equity returns have been about cheap leverage, I think, frankly. So we have seen, I think, from a longer-term perspective, a compression in terms of excess returns over public markets diminishing, which means that private equity perhaps on average is not going to provide same excess return going forward than it has historically. But I think that private equity does continue to represent a very interesting opportunity for the Trust because the dispersion or the difference between the winners and losers in the private equity space is substantially bigger than the winners and losers from a portfolio manager perspective, in the listed space. So there's a lot of opportunities, but the selection is really key in the private equity space. So we continue to commit to private equity opportunities, but it is selective, and we think it's thoughtful, and we'll continue to not only assess the program through time but assess the individual opportunities that we see in that space.

Well, I've got somebody here who is congratulating you in your 2061 borrowing at 1.8% and is asking whether given the gearing has been successful, whether you have any plans to increase the gearing.

So I don't have any immediate plans to tactically increase the gearing. As I said, I think the environment is reasonably constructive, not without risks as we've talked about, for sure. But that level, looking at debt par around about 10% is about right, I think. We have some more capacity to raise gearing modestly from current levels, but I'm comfortable where we are. And just to repeat the point and perhaps for the benefit of the viewers and listeners to this event, that 1.87% putting in context, as we can earn a return, we take those borrowings, put it into investments as long as we earn a return, which exceeds the cost of borrowings, that's going to be accretive for add to returns. So that's a very low hurdle for us to deliver value through borrowings over a long period of time. But I don't have any immediate plans to be significantly raising gearing at the present time.

There's a number of questions about whether various charts can be reviewed and whether it's online, the whole thing will be online as I think you'll find out in a minute. It just remains for me to thank Bea Hollond and Paul Niven for participating here today. Our greatest thanks go however, to you, the shareholders for taking part of this event. Thank you for all your questions. And I would just like to wish you a very successful and happy rest of 2024 and beyond. Thank you.

Bea, Paul, Steven thank you very much indeed, once again for updating investors. Can I please ask investors not to close the session as well now automatically redirect you in order that you can provide your feedback so that the managers can better understand your views and expectations. This will take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the Board of F&C Investment Trust PLC I would like to thank you for attending today's presentation, and good afternoon to all.