Lindsell Train  

'Caution about world getting back to normal' helps Lindsell Train trust

'Caution about world getting back to normal' helps Lindsell Train trust

Investors are growing cautious about the return to normal and are moving back to growth stocks, the investment manager of the Lindsell Train investment trust has said.

In an update to investors yesterday (July 26), Nick Train said since suffering from a bout of profit-taking in February and March this year, the trust’s performance had improved.

“This can be ascribed to investors’ growing caution about the world getting back to 'normal' anytime soon, if ever, and a corresponding shift of investor preference back to secular growth companies,” he said. 

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“This has been accompanied by a rally in government bond prices, as fears about imminent, runaway inflation recede. Both these circumstances have helped our portfolios.”

The trust’s market capitalisation has risen from £288m to £304m from May to June, and its share price has risen to £1,520 from £1,440 in the same period.

The trust is currently trading at a 15.84 per cent premium, down from a 16.77 per cent premium last month.

The trust has seen a rocky few months. Last month, it 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 on June 17, Train summarised the reason for the "lackluster performance" which was that the trust was under-represented in two global trends that have dominated markets in the past year.

The first trend was the bull market in technology, 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 the trust had ‘always avoided’ investment in these sectors.

In June, the firm waived half of its £5.3m performance fee for the investment trust for the past year.

The investment manager had accrued a fee of £5,323,404 for the year to March 31, 2021 but Lindsell Train offered to waive half of that fee.

At the same time the trust changed its benchmark index and calculation of the fee.

It adopted the MSCI world index in sterling as its benchmark from April 1, which the board said was a “more appropriate” benchmark given that the firm’s portfolio is predominantly invested in equities.

In a statement to the stock exchange on June 6, the board said the new benchmark would also be used to calculate the performance fee in future, which was expected to lead to a lower fee.