Bevan Blair, chief investment officer at advice market consolidator One Four Nine Group, has said he is sticking with his holdings in funds run by Terry Smith and Nick Train.
Blair justified the decision by stating that “the market will eventually agree” with the fund managers’ investment strategy.
He said: “While I do the portfolio management, none of the advisers are compelled to use it if they don’t want to. We have acquired three firms in four months, and right now I am trying to build up credibility with those guys.”
Investing in the funds of well regarded and long established stock pickers such as Nick Train and Terry Smith would, in more normal times, be an easy choice for a portfolio manager meeting new clients.
But the performance of Fundsmith Equity, and the Lindsell Train UK and Global Equity funds have performed poorly for the past year.
The £6bn Lindsell Train Global Equity fund returned just 0.08 per cent in 2021, compared to a return of more than 18 per cent for the sector. The fund is now ranked 361st out of 380 funds in the IA Global sector over the past three years.
The £5bn Lindsell Train UK Equity fund has returned 9 per cent over the past three years, underperforming relative to its sector.
Fundsmith Equity is the largest fund in the UK market with assets of over £23bn, it has lost money over the past twelve months and has underperformed relative to its sector on a three year basis.
However, Blair has not considered selling any of those three funds. He said: “We generally prefer big, liquid funds, and have not been tempted to Fundsmith or Lindsell Train.
"The managers are sticking to the investment philosophy I wanted when I bought those funds. If they drifted away from that, if for example Terry began to trade more, that would be a trigger to sell. But short-term underperformance is not a trigger to sell."
He added that both veteran managers each believe in the very long-term value of the companies in which they are invested.
"While right now the market doesn’t agree with them, the style is out of favour, but in time I think the market will agree and the performance will improve", he added.
Both Smith and Train use the growth style of investing, which Blair believes to be ultimately superior to the alternatives.
Blair explained: “When you look at the portfolios we have, certainly there is a growth bias. We think the long-term risk with an investment is company risk, not price risk, because share price movement is short-term.
"In the long-term, if you pick the right companies, the growth will swamp the valuation.”
Blair was formerly director of strategic asset allocation at Tilney before joining One Four Nine Group in 2019. The company acquired its third advice firm in January, and has assets under management of £550m.
According to Blair, One Four Nine Group has a pipeline of further acquisitions on which it is working.
david.thorpe@ft.com
