Train triumphs over long-term
The Lindsell Train investment trust has more than trebled share-holders' initial investment over the last decade.
By Mark Smith, senior reporter
Friday August 10, 2012
Investors looking for growth over the long-term might wish to consider a globally diversified investment trust such as Lindsell Train.
With the UK economy in recession and the prospects for growth looking muted for several years to come, investors are increasingly looking to other markets to give their portfolios a lift.
Managers of global funds have a remit to seek out worthy companies from anywhere in the world. With the world’s economies all at different stages in their economic cycle, casting the net far and wide gives global investors a better chance of catching companies in markets that are on the up. The extra diversification also protects investors from any unexpected shocks.
FE Alpha Manager Nick Train
, who heads up the top-performing CF Lindsell Train UK Equity open-ended fund, focuses on long-standing businesses and describes his approach as ‘value’ investing.
While investors in the open-ended product will be pleased with the top-quartile returns Train has generated, his investment trust - Lindsell Train has posted even better results.
Data from FE Analytics shows that the closed-ended fund has returned 87.45 per cent over the last five years, almost double that of the OIEC and more than 10 times the 8.1 per cent posted by the average Global Growth investment trust. Over the last decade it has returned 235.82 per cent.
Performance of investment trust versus sector over 10 yrs
Source: FE Analytics
Many experts consider investment trusts to be a better bet than their open-ended cousins over the very long-term because they are able to make use of gearing or borrowing money to take advantage of fast rising markets.
The structure also means that the managers don’t have to constantly adjust their positions to compensate for inflows and redemptions and are able to stay invested in companies for the very longer periods. The average holding period for investment trusts is considerably longer than for other types of investment.
Train has a significant overweight in Technology companies relative to the sector – 15.5 per cent of the portfolio is in Telecom, Media & Technology (TMT) stocks compared with 11 per cent from the average fund in the sector.
In a recent interview with FE Trustnet Train said that the world was on the brink of a long bull market for these companies.
“We are only at the beginning of a multi-decade boom in consumer technology. The biggest company on the planet, Apple, is rising at an annualised rate of 80 per cent, based on 40 per cent in the first half of the year.”
“It’s like the era of the railroads in the nineteenth century, and it’s difficult to find ways for a UK-focused fund to participate.”
Train lists games console manufacturer Nintendo in the trust’s top-10 holdings.
The fund is more aggressive than the sector average and is therefore more suited to investors who can tolerate capital loss. Our data shows the investment trust has an annualised volatility score of 15.48 per cent over three years while the average fund in the sector has a score of 12.68 per cent.
Charles Younes, fund analyst at FE, however, says that the extra risk is compensated for by the return.
“Train is confident about his stock-picking skills and does not hesitate to manage a concentrated portfolio of high conviction names. His approach might be considered risky by investors,” he said.
“Nevertheless, we definitely consider him as an excellent stock picker as he has consistently outperformed his peers and benchmark over the last few years.”