The Lindsell Train investment trust saw its NAV total return underperforming world markets for the first time in a number of years.
NAV total return for the year to March 31 was 29 per cent, compared with the MSCI world index total return of 38 per cent.
In full year results for the trust posted today (June 17), investment manager Nick Train summarised the reason for the "lackluster performance" which was that the trust was under-represented within two global trends that have dominated markets in the past year.
The first trend is the bull market in technology that has continued in recent months, from which the trust did not benefit as it was not a 'natural' investor in young technology companies, Train said.
The second was the big recovery in cyclical sectors, with Train adding that the trust has ‘always avoided’ investment in these sectors.
The trust currently has 56 per cent exposure to financials, 20 per cent to consumer staples, 9 per cent in information technology and the rest spread across consumer discretionary, healthcare, industrials, and communication services.
He said his response was not to change much, as he remained "optimistic about the thematic ideas and companies we are invested in", and that the recent underperformance was an opportunity to add, not a reason to sell.
He added there were other reasons not to shuffle the portfolio.
He said: “Submitting client portfolios to surgery incurs transaction costs which need to be justified; and certainly reinvesting in the areas of global stock markets that are currently booming would not only be costly but could also expose our clients to the risk of joining a party late.”
The company’s net asset value was up from £956.65 at March 31, 2020 to £1,185.58 on March 31, 2021.
Including the dividend this represented an NAV total return of 29 per cent with the company’s holding in Lindsell Train Limited contributing a total return performance of 40.8 per cent, and the quoted portfolio contributing 18.6 per cent.
The share price total return was 38.9 per cent, but should be set against the fall of 26.5 per cent in the previous financial year.
The share price premium to the NAV ended the year at 20 per cent, up from 11 per cent on March 31, 2020, after it averaged at just under 10 per cent during the year.
The statement to the stock exchange also outlined the board was focussing on whether the trust can manage a ‘seamless succession’ of the trust’s management away from Train and his co-founder Mike Lindsell.
It said the six-strong investment team was ‘maturing’ and "the more recent members are increasingly taking on more responsibility and contributing to the decision-making process".
It added the founders remained "as committed as ever to the long-term success of LTL but recognise the necessity to plan ahead".
In the summer of 2019, Lindsell announced that he and Train had started to take steps to ensure a seamless transition of management in the "unlikely scenario that Nick or I will not be around for whatever reason".