Lindsell Train admits ‘two years of disappointing performance’ as investment confidence beats market but sees value shrink
- Investment fund Lindsell Train’s NAV fell 3% in the six months to September
- Exposure to Lindsell Train Limited weighed on performance, chairman says
- It outperformed the MSCI World Index, which lost 7.3% over that period
Lindsell Train’s chairman acknowledges a few “disappointing” years for the investment company, which was weighed down by the poor performance of a core holding company.
Julian Cazalet said Lindsell Train Limited (LTL), which accounted for 42.7 percent of the trust’s NAV as of Sept. 30, “experienced disappointing relative performance for more than two years” across all four equity strategies.
The Lindsell Train Investment Trust has a 24.2 percent interest in Lindsell Train Limited LTL, the fund house behind the management of the trust.
Nick Train, Lindsell Train’s investment manager, said despite poor performance that “the best is yet to come” for several positions
Cazalet said exposure had the biggest impact on performance, after NAV fell 10.4 per cent and assets under management fell by nearly £2 billion. This was driven by £1.5bn in redemptions and £400m in falling market prices.
Cazalet added: ‘The experience of recent years illustrates the investment risk inherent in a fund management company that has a unique approach to investing.
“While LTL offers four strategies differentiated by geography, all of its portfolios are managed with a consistent approach and are mostly filled with the same type of companies.”
The big Lindsell Train bounty is gone
Lindsell Train Investment Trust previously had a share price that traded at a huge premium to its net asset value.
This was because the market believed that the share price of the trust did not reflect the value of the Lindsell Train fund management’s interest.
Throughout 2018 and most of 2019, Lindsell Train stock consistently traded at a 30 percent premium and at one point AIC numbers show it hit 90 percent.
At the start of the year, Lindsell Train traded at a 15 percent premium, fell to a discount over the summer and now trades at a 2.8 percent premium.
While Lindsell Trust believes the approach will outperform in the long run, “the strategy could fall out of favor if it is found to generate inferior returns in the short term compared to alternative strategies.”
The trust saw an overall price drop of 6.5 percent per common share, while its NAV fell 3 percent in the six months to Sept. 30.
Despite the underperformance, it outperformed the total return of the MSCI World Index, falling 7.3 percent over the period.
Asset manager Nick Train said that “to navigate through the current macroeconomic and geopolitical thicket, I have to work harder than usual to maintain my innate optimism.”
But the stockpicker added that the outlook for the companies he has invested in is “increasingly bright.”
He highlighted Nintendo as a strong player in the portfolio that creates some of the most “wanted” content, including 33 percent ownership of Pokemon and rights to create its console games.
‘Gaming is an immature industry; Nintendo’s content is loved; new sales records for its games and devices are likely to be set for years to come,” he said.
He also said “the best is yet to come” for RELX, London Stock Exchange and Diageo, which Train also holds in its Finsbury Growth & Income Trust.
The academic publishing division of analytics firm RELX recently confirmed that it publishes 18 percent of global research articles and 27 percent of all citations.
“It’s hard to conclude anything other than that RELX’s customers will need even more of its data and analytics services in the coming years as business and academic professionals must understand the exponentially growing volumes of data.”
Train said he was encouraged by the “chutzpah” of LSE chief executive David Schwimmer, who in July said he had advised on hundreds of transactions, but none were as “transformative and value-creating” as LSE’s acquisition of Refinitv.
Finsbury Growth & Income has also struggled with a period of underperformance amid the rotation from growth to value, but made a tentative comeback in October.
The fund’s total return per share rose 0.4 percent, but fell 10.7 percent in the current year.