Age may bring wisdom, but the world's oldest investment trust proved yesterday that this does not necessarily extend to avoiding huge stock market losses.

The Foreign & Colonial (F&C) Investment Trust admitted that it had lost £680 million last year after sticking to its policy of investing in equities.

The F&C Investment Trust was founded in 1868 to allow small investors to buy shares. It is considered the grandfather of the modern fund management industry. However, the trust said that last year was the worst it had endured since 1974 as its equity portfolio fell in value by more than a quarter to £1.78 billion. The trust's net asset value, the per-share value of its investments, fell by 28.5 per cent to 256.6p.

The F&C Investment Trust was the first collective investment vehicle and was created by one Philip Rose, who was also a founder of the Norton Rose legal partnership and the Royal Brompton Hospital. UK investments include North Sea oil projects, the Channel Tunnel and the musical Cats.

However, its policy of staying in equities and borrowing to enhance earnings resulted in large losses last year. Mark Loveday, the trust's chairman, said: “2008 was the single worst year for investors and for your company since 1974. The fact that investors around the world and in most asset classes had a similar experience is of little consolation. Sticking to our long-term policy of being fully invested in global equities was painful and having borrowings in a falling market also resulted in underperformance relative to our benchmark.”

Investment trusts are quoted on the London Stock Exchange and their boards hire fund managers to invest their portfolio. F&C, which is owned by Friends Provident, was paid £9.3 million last year by the trust to run the fund and received a bonus of £600,000, despite the losses.

Mr Loveday added that this year could be even worse for investors than last as share values continue to slide. “So far, 2009 is proving to be just as difficult and volatile as 2008. I fear that uncertainty will continue for some time yet, but I am convinced that opportunities will start to appear in due course and that our long-term investment approach will ultimately add value for shareholders, as it has in the past.”

The shares fell 4p, or 2.5 per cent, to 184p.

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