Nick Train has acknowledged he has tested the patience of investors in the Finsbury Growth & Income Trust, after it underperformed its benchmark for the second year in a row.
In the £1.8bn trust’s annual general meeting this week (January 17), Train, the trust’s investment manager, said the trust’s performance has not been satisfactory to him either as a professional investor, or a shareholder in the company.
Train has apologised for the trust’s performance before, telling investors last May that he “sincerely hoped” performance would improve.
The trust lost 6.5 per cent in 2022, underperforming the FTSE All-Share which returned 0.3 per cent.
The year before, it returned 13 per cent, compared with the benchmark’s 18.3 per cent.
At the end of December, the trust's shares were trading at a 4.2 per cent discount to net asset value.
However, on an annualised return basis, the trust has outperformed its benchmark by four percentage points since 2001.
Train told investors: “Thank you for your patience…I must acknowledge to you that I have tested your patience over the last couple of years.”
He said he does not believe “radical changes” are necessary in order for the trust to look forward to better returns, highlighting that there were no new holdings acquired in 2022.
Instead, he said, it is a “perfectly viable” approach to construct portfolios around great businesses, and then wait.
“If you are prepared to wait, you are prone to find that the result will be wonderful changes to your wealth.”
Train emphasised his continued optimism about the outlook for the trust, highlighting the 94 per cent of companies in the trust (measured by value), which increased their dividend in the year, as well as the 85 per cent that enacted share buybacks.
These companies include Burberry, the London Stock Exchange, Mondelez, and RELX.
However, Train said the fall in share price of drinks company Fever-Tree was his “biggest embarrassment” in 2020.
Finsbury trust's top ten holdings
|London Stock Exchange||Financials||9.6|
|Burberry Group||Consumer discretionary||8.6|
|Mondelez Int||Consumer staples||7.8|
|Remy Cointreau||Consumer staples||5.2|
The company’s stocks dove 60 per cent in 2022, and Peel Hunt analysts downgraded its Ebitda guidance by 40 per cent due to a combination of labour shortages in the US, greater exposure to sea freight, and the cost and availability of glass.
“I thought I was being so clever when I began to accumulate that position in early 2020,” Train said.
At that point, the company’s shares were trading 60 per cent lower than their previous peak.
“But they have carried on falling,” he said.