Lindsell Train has written down the value of its own funds business in light of the coronavirus crisis, which has seen the fund house’s assets fall by about £4.5bn.
In an update on the Lindsell Train investment trust, published yesterday (April 15), Michael Lindsell, co-founder and fund manager, said a fall in value of the Lindsell Train funds business had contributed to the trust’s net asset value falling 7 per cent.
In September last year the fund house’s assets under management stood at £22.5bn but they have since fallen to £18.2bn.
About 47 per cent of the trust is invested in the funds business, owning about a quarter of Lindsell Train.
He said: “This month the board felt it appropriate to modify the earnings component of its valuation formula to fully capture the fall in Lindsell Train’s funds under management to £18.2bn at the end of March and its effect on earnings.”
Mr Lindsell said the decision to write down the business also reflected a sharp fall in the values of many rival fund management companies, as evident in those quoted on the stock exchange.
But he looked to reassure shareholders that the company’s biggest cost — salaries — automatically fell as the business’s revenues declined, due to the link between the two.
He added: “It’s also a reassurance that Lindsell Train is so well capitalised. The company currently has substantial net cash on its balance sheet.”
In terms of the trust's other investments, Mr Lindsell said the quoted companies held by the investment vehicle had “fared well” relative to the performance of the markets, but added that “none would be immune” to the economic fallout.
The trust’s second biggest holding, the London Stock Exchange, has only lost 8 per cent over the past three months while Nintendo, which accounts for 7 per cent of the trust, has risen in value by 10 per cent since the start of the year.
Mr Lindsell said: “Of all our companies Nintendo is uniquely positioned to take advantage of the necessity to remain at home given the focus on home entertainment.”
He also thought the investment in eBay should benefit from increased activity while physical retailers remained closed, while everyday goods provided by companies such as Unilever, another investment, should be supported as in-home consumption was up.
Over the past year the trust has lost 24 per cent in share price terms, while its peers in the Global AIC Sector have returned 1.8 per cent. Over 10 years, however, the trust has returned 655 per cent, compared with a 200 per cent return for the sector.
Mr Lindsell said: “The unprecedented nature of the disruption and the lack of any template to work from in recent history makes the ultimate effect difficult to predict.
“All we can say is that our investment approach steers us away from capital intensive manufacturing businesses, those reliant on commodity prices to sustain revenues and those dependent on high operational leverage.”