The co-manager of the Lindsell Train Investment Trust has said it is critical for the fund to hold investments in companies that produce products people aspire to, such as champagne.
In the trust’s monthly report released this morning (September 24), Nick Train said: “Longer term, whatever the outcome on inflation, we are sure it is critical for our investments in companies that produce 'real' stuff, as opposed to digital services – to be producing products customers actually aspire to consume or really can’t do without.”
He added he wants more exposure to luxury goods firms, adding “we want...more premium, more pricing power in the portfolio”.
Train highlighted holdings in beverage company Diageo and Laurent-Perrier as of importance to the fund, adding he wants to build the trust’s holding in the latter.
The rate of inflation has been rising since May this year, with the rate hitting 3.2 per cent in the 12 months to August 2021.
However, the Bank of England’s monetary policy committee voted yesterday (September 23) to keep the base rate of interest at 0.1 per cent.
Train said inflation, by way of a spike in commodity and logistics costs, proved to be an adverse macro factor for the portfolio in July and August.
He did not confirm whether he thinks the inflation rise will be transient, as the Bank of England believes, but said the spike could be the result of temporary Covid disruption, “or perhaps the global monetary experiment of the last decade is at last feeding through into sustained inflation”.
The trust’s market capitalisation as at August 31 this year was £326m, and is currently trading at a 31.31 per cent premium.
In its full year results released in June, the board of the trust highlighted that it was exploring whether the trust can manage a ‘seamless succession’ of its management away from Train and 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".