Profile: F&C Managed Portfolio Income (FMPI)
F&C Managed Portfolio Income is managed by veteran investor Peter Hewitt, who has been with the group since 1983, working across a variety of management teams. He has managed this trust and its sister trust, F&C Managed Portfolio Growth, since 2008.
The trust is global in its remit, though with a natural bias to the UK (currently 44%) of the trust. Mr Hewitt invests in some familiar names, including City of London Investment trust and Murray International, but also some spicier options, such as Schroder Oriental Income fund. The trust usually holds about 25 underlying trusts.
The key on this trust is the income. The trust currently pays 4.4% with dividends paid quarterly. It targets a yield ahead of the FTSE All Share at all times. This focus on income could mean that the capital performance might lag, but in practice the capital value has been roughly in line with the FTSE All Share over time (66% versus 60% over five years).
The multi-manager structure makes the trust a little costlier than some of its peers, because the underlying managers will also levy a charge. The management fee is currently 0.65% and the total expense ratio is 1.4%.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
Total expense ratio
Most investment funds levy an initial charge for buying the units/shares and an annual management fee but other expenses also occur in running the fund (trading fees, legal fees, auditor fees, stamp duty and other operational expenses) which are passed on to the investor and so the TER gives a more accurate measure of the total costs of investing. The TER is especially relevant for funds of funds that have several layers of charges. Unfortunately, investment fund companies are not obliged to reveal TERs and many only publish the initial charges and annual management charge (AMC).
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.