News Column

F&C Capital & Income Investment Trust Hit By Annuities Exposure

May 22, 2014

Samuel Agini

LONDON (Alliance News) - F&C Capital & Income Investment Trust PLC said its net asset value rose by 1.8% in capital terms and by 3.9% in total return over the first-half, compared with rises in the FTSE All-Share of 3.2% on a capital basis and 4.8% on a total return basis.

The share price total return over the six months ended March 31 was 5.4% ahead of the benchmark and NAV as the shares traded at a larger premium.

The trust said its underpeformance against the index was due to its exposure to specialist annuities provider Partnership Assurance Group PLC, whose share price was hurt badly after the UK government's unveiled a shake-up of the pensions market in March. The proposals remove the effective requirement on individuals to buy products that guarantee income in retirement, known as annuities.

"Our holding in Partnership Assurance fell by two thirds over the period, contributing 0.8 percentage points of the 0.9 point shortfall. This company was a victim of [Chancellor George Osborne's] unexpected changes to the rules on retirement, removing the compulsion on retirees to purchase an annuity," Chairman Steven Bates said in a statement.

The chairman said other life insurance holdings were hurt after a UK regulatory official briefed a national newspaper about an upcoming review into life insurance policies, leading to a poor performance by the sector as a whole. By contrast, the trust said the largest positive contribution by sector came from non-life insurance.

"Positive stock contributions came from Beazley PLC, which was re-rated on strong results, and Barclays PLC, where we benefited from not owning the shares as poor results and difficult investment banking conditions hit hard," Bates said.

While the last six months' returns have lagged the index, over the last three years the trust's NAV total return was 31.4% compared against a total return on the FTSE All-Share index of 28.5%.

In the long term, over the last 15 years, the trust's NAV is up by 121.7% compared against 99.6% for the index.

"It is these medium and long-term returns which attest to the capabilities of your manager, rather than the much noisier short-term data which can be distorted by individual events of the sort which derailed Partnership Assurance," Bates said.

Meanwhile, Bates said the trust's income grew by 4.6% as corporate dividends increased during the period.

F&C Capital & Income Investment Trust share were quoted up 0.1% at 268.25 pence Thursday.

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Source: Alliance News