The Lindsell Train investment trust is to scrap its gearing capability as it anticipates the rising costs of regulatory policy.
Although the trust can borrow up to 50 per cent of the net asset value of the company to enhance returns, the directors have decided “that it is in the Company’s best interests to not use gearing in future”.
“This is in part a reflection of the increasing size and risk associated with the Company’s unquoted investment in Lindsell Train Limited but also in response to the additional administrative burden required to adhere to the full scope regime of the Alternative Investment Fund Managers Directive (”AIFMD”) should any gearing remain in place,” trust chairman Donald Adamson said.
Elsewhere, investment manager Nick Train acknowledged the recent bounce in oil has harmed bond prices and that has had a ‘possible impact’ on his actively-invested portfolio.
However, these cheaper energy prices are also likely to boost the performance of several holdings, according to Mr Train, particularly the investments in major global consumer branded goods owners.
‘Their costs are declining, while their billions of customers are feeling better off. Of course we have several such as the core of LTIT’s portfolio. Very recently oil has rallied and this has knocked back prices of, for instance, Diageo, Heineken and Unilever,” Mr Train said.
The Lindsell Train investment trust’s net asset value total return per share rose by 27.9 per cent in the year to March 31, ahead of the 3.8 per cent rise seen by the benchmark, the index of the annual average yield on the UK 2.5% Consolidated Loan Stock. It was also considerably higher than the 19.7 per cent rise in the MSCI World index in Sterling.