‘There’s a lot of value in emerging markets’ - Paul Niven of F&C
Paul Niven, manager of the F&C Investment Trust, discusses the trust's diversified multi-manager approach to global equities and private equity, its performance relative to peers and benchmarks, and current portfolio positioning amid geopolitical volatility caused by a war involving Iran. He outlines why diversification rather than concentration is central to their strategy, and where he sees opportunities in emerging markets, the US, and private equity.
Summary
Paul Niven, manager of the F&C Investment Trust at Columbia Threadneedle Investments, describes the trust as a one-stop shop for global equity exposure with nearly £7 billion in assets. The trust has delivered 55 consecutive years of dividend increases and aims to grow both capital and income over the long term. The portfolio is structured in layers: strategic asset allocation (roughly 90% listed equities, 10% private equity), tactical positioning based on market conditions, and manager/strategy selection using a blend of internal Columbia Threadneedle managers and external third-party managers such as JP Morgan (US large-cap growth), Barrow Hanley (US large-cap value), and Invesco (emerging markets). The ongoing charge is approximately 0.45%, which Niven considers highly competitive.
On performance, Niven acknowledges that while F&C has been the best-performing trust in its sector over five years and has beaten the median peer across 1, 3, 5, and 10-year periods, it has only delivered returns broadly in line with — rather than meaningfully ahead of — the FTSE All World benchmark. He attributes this partly to the extreme market concentration around a small cohort of US mega-cap growth stocks.
Niven defends the trust's highly diversified structure — holding several hundred listed stocks across approximately 10 concentrated sub-portfolios — by citing academic evidence that only around 4% of companies drive most long-term equity market returns, and that more concentrated portfolios are statistically more likely to underperform than outperform an index. He argues that blending multiple concentrated strategies achieves diversification while maintaining active management.
Regarding current positioning, Niven explains that the trust entered 2026 optimistically, expecting broadening global growth and a gradual rotation away from US equities toward emerging markets and Europe. A war involving Iran disrupted this outlook, causing oil price spikes and inflation fears. However, markets have since largely recovered to record highs. The trust took advantage of the March sell-off to add equity exposure via US and emerging market futures, increasing gearing from around 2.7% to approximately 5.5%. He remains cautiously optimistic that the ceasefire will hold, though he acknowledges lasting damage to energy infrastructure — notably a Qatari LNG plant — and reduced prospects for European earnings.
On the Magnificent Seven and AI, Niven notes the trust has generally been underweight this cohort, with Microsoft being the largest underweight. He views these as exceptional companies but believes valuations are more attractive now than six to twelve months ago. He highlights Nvidia specifically as trading around 18x 2027 earnings given strong GPU demand and its software moat, and expects it to remain well-positioned in the AI cycle. He is broadly positive on AI's long-term productivity benefits but cautious about which companies will ultimately capture the returns from current heavy CapEx spending.
On private equity, Niven explains the trust targets the lower mid-market (sub-£500m enterprise value) to avoid crowded mega-buyout deals, and blends internal Columbia Threadneedle sourcing with external managers like Pantheon for venture/growth exposure. He acknowledges private equity has underperformed listed markets over the past three years but believes selective exposure — particularly in venture with top-tier managers and in specific co-investments — still offers strong return potential. He also flags software exposure within private equity as a genuine concern given AI disruption risk.
On emerging markets, Niven argues valuations remain attractive after a prolonged period of underperformance, and that the Invesco-managed emerging market portfolio is currently tilted toward Latin America — particularly Brazil and commodities — rather than Asia, partly as a hedge against energy supply risks from the Middle East conflict.
Key Insights
- Niven argues that only around 4% of companies drive most long-term equity market returns, and that more concentrated portfolios are statistically more likely to underperform an index than outperform it — directly challenging the conventional 'high conviction' active management pitch.
- Niven claims F&C has been the best-performing trust in its global sector over five years, beating median peers across all standard time periods, but concedes it has only matched — not beaten — the FTSE All World benchmark, which he attributes largely to underweighting US mega-cap growth stocks.
- Niven states that F&C first invested in Facebook when Mark Zuckerberg was 21 and the company was valued at $100 million through its private equity portfolio, and has held Amazon since 2006 when it was a $10 billion company — used to illustrate the long-term compounding potential of staying invested in dominant companies.
- Niven argues that private equity returns are best pursued in the lower mid-market (sub-£500m enterprise value) because the mega-buyout space has become crowded with capital, compressing returns, while smaller deals offer more idiosyncratic value creation opportunities.
- Niven claims Nvidia is trading at approximately 18x 2027 earnings as of mid-April 2026, and that its software ecosystem creates a wide moat beyond chip hardware alone — used to justify the trust's significant overweight position despite generally being underweight the Magnificent Seven.
- Niven argues that in venture capital, average managers perform poorly but top-tier managers deliver consistently strong returns due to self-reinforcing deal flow advantages — and therefore participating in venture only makes sense if you can access preeminent managers, which F&C does through Pantheon.
- Niven states that the trust increased gearing from approximately 2.7% to 5.5% by buying US equities and emerging market futures during the March 2026 sell-off triggered by the Iran war, and that markets have since risen approximately 10% from their lows, characterising this as a successful tactical trade.
- Niven argues that software as an asset class — both listed and private equity — has now given up all of its excess returns generated over the prior decade relative to the broader market, and that AI-driven disruption risk to enterprise software is real but the difficulty of displacing embedded software tools in organisations is underappreciated.
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