Nick Train has revealed the reasons behind his decision to double his investment in Hargreaves Lansdown, despite the shares falling 26 per cent in less than six months.
Hargreaves shares were £22.70 in October, and are now (February 14) £16.51. In its most recent results, covering the six months to December 31, 2018, the company reported a 6 per cent drop in assets under management.
Despite this, stock market filings showed recently that Mr Train’s various funds doubled their stake in Hargreaves Lansdown, and clients of his firm now own about 10 per cent of the company.
In his latest update to shareholders of the £1.4bn Finsbury Growth and Income trust, Mr Train said he had found many positives in Hargreaves' results, including that the number of clients using the phone line had increased, while the time it took for a call to be answered had fallen.
He wrote: "It is undeniable that growth slowed at Hargreaves Lansdown, during a very tricky time for UK politics and global stock markets.
"Nonetheless the business did grow and, importantly, took share – now representing 39 per cent of the D2C platform market and nearly 32 per cent share of the stock broking market.
"We liked some of the two year statistics the company shared. Over that period the number of clients is up 30 per cent to 1.1 million; transactions on the site have climbed from 5.4 million to 6.1 million pa.
"The number of calls to the help desk has increased from 680k to 890k pa, while – and I love this statistic – the time taken to answer a client call has fallen from 30 to 18 seconds.
"In short, Hargreaves has and continues to invest heavily in its client service. When confidence and volumes recover, we’d expect HL to deliver explosive growth.
"In the meantime the shares were down 30 per cent from their highs at the January lows."
Hargreaves Lansdown shares tend to do badly when market sentiment is negative, as falling share prices mean the assets under management fall.
But Mr Train has said he was "always bullish" on equities.
The Finsbury Growth and Income trust is the absolute top performer of the 24 trusts in the AIC UK Equity Income sector over the past year to February 14, returning 13 per cent compared with 2 per cent for the average trust in the sector.
Jim Harrison, of Master Adviser, an advice firm in London, said he recognised the growth potential of Hargreaves Lansdown shares but was not a fan of the investment case nevertheless.
He also tends not to use the Finsbury Growth and Income trust for clients as, while the overall performance is strong, the dividend is not consistent enough.
Mr Train has acknowledged that the dividend offered by his trust is lower than that of many of his peers, but the total return on his trust is higher than that of his peers.
Francis Klonowski, an adviser at Klonowski and Co in Leeds, said he personally invests in Finsbury Growth and Income and also uses the trust in clients' portfolios.
He regards the trust as an investment for capital growth and said he had very few clients who take the dividend anyway.
david.thorpe@ft.com
