Buying CF Lindsell Train UK Equity is one of the best investment decisions that Henderson’s Bill McQuaker has ever made, the FE Alpha Manager tells FE Trustnet. The experienced fund of funds manager says he began buying the five crown-rated fund – which is headed up by fellow FE Alpha Manager Nick Train (pictured) – in 2006.
McQuaker classes it as one of his best decisions because he says the manager’s active, high-conviction style has led CF Lindsell Train UK Equity to become a "backbone" of all four of his Henderson Multi Manager portfolios.
"When you asked me the question, my thought process for this was to look at funds I have held during my career that have consistently added value," he said.
"Whether a bull or bear market, good economic climate or bad economic climate – I am thinking of funds that consistently added value and that have been the backbone of the portfolios."
"My single most important investment decision has been to have faith in the idea of actively managed funds and identifying them. Using that process, one of the funds that has helped the most is the Lindsell Train UK Equity Portfolio."
"We started buying the fund around 2006 and after an initial period which was somewhat disappointing, it has been just fantastic for us."
Lindsell Train UK Equity is a top-quartile performer in the IMA UK All Companies sector over one, three and five years, according to data from FE Analytics.
Since the fund was launched in July 2006 it has returned 113.14 per cent while the FTSE All Share and the sector have made 41.92 per cent and 39.3 per cent, respectively.
Performance of fund vs sector and index since July 2006
Source: FE Analytics
The fund has also been less volatile than the sector and its benchmark over this time.
The manager’s consistency has also been hugely impressive. CF Lindsell Train UK Equity is one of only two portfolios in its sector that is a top-quartile performer in each of the last five calendar years. The other is Liontrust Special Sits.
McQuaker is a big fan of Train’s high-conviction investment process.
"The fund initially underperformed because during that time in the UK market, oil and mining companies were doing extremely well," he explained. "Nick didn’t have any exposure to them; in fact I don’t think he has ever had exposure to them."
"In his view, they are too cyclical and just too volatile."
"Since then, his fund has performed well in good and bad periods as he uses a type of barbell approach."
"He has large holdings in the likes of Diageo and Unilever, which have good underlying performance and decent dividend growth. When the world is difficult, those sorts of companies outperform."
"The risk of these companies is that when markets are very strong, they underperform."
"To compromise, he holds things like asset managers and media companies that are higher Beta and are more inclined to do well in a rising market. His barbell approach means he has companies that are maybe a bit stodgy, but provide ballast, and others that drive growth."
"In the recent upturn the fund has done well, even though he isn’t running an especially risky portfolio."
Lindsell Train UK Equity is the best-performing fund in its sector so far this year, with returns of 17.5 per cent, according to our data.
McQuaker holds the fund in all four of his Henderson Multi Manager portfolios. It makes up 3.39 per cent of his Distribution fund, 5.05 per cent of his Income & Growth fund, 5.31 per cent of his Managed fund, and 4.86 per cent of his Active fund.
Excluding McQuaker's portfolios, 17 multi-asset funds count CF Lindsell Train UK Equity as a top-10 holding.
The £650m portfolio is only available directly to institutional investors, but can be bought on a number of platforms for a minimum investment of around £500 to £1,000.
Although McQuaker highlights Train’s portfolio as his best buy, he says First State Global Emerging Markets, First State Asia Pacific Leaders, Henderson European Growth, Findlay Park American and GLG Japan Core Alpha have also been great picks.
McQuaker thinks the £272m Henderson Global Growth fund could prove as successful as Train's in the future.
"One of the funds we bought recently which we thought could possibly reach the heights of the Lindsell Train fund is Henderson Global Growth," he said.
"It is run by Ian Warmerdan, who is most commonly associated with the tech franchise here at Henderson."
"Although the fund does have quite a lot of IT companies, they aren’t the only part of the portfolio as he looks into other high-growth areas."
"I wouldn’t be surprised if 10 years down the line I was saying it was one of my best ever investment decisions," he added.
Warmerdan has managed Henderson Global Growth since April 2009. Under his management it has returned 101.31 per cent.
This figure means it is the 10th best-performing fund in the IMA Global sector over the period. It has comfortably beaten its MSCI AC World benchmark as well.
Performance of fund vs sector and index since Apr 2009
Source: FE Analytics
The fund holds 38.3 per cent in IT, 20.1 per cent in consumer discretionary and 19.8 per cent in healthcare. Its largest regional weighting is to the US, at 64.2 per cent.
McQuaker has 2 per cent of his Henderson Multi Manager Managed portfolio in the fund.
Henderson Global Growth has an OCF of 2.38 per cent and requires a minimum initial investment of £1,000.
McQuaker currently runs nine funds of funds at Henderson Global Investors. His career running funds in the IMA universe began in July 2005 and over that time he has returned 68.61 per cent, compared with 45.32 per cent from his peer group composite.