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Strong returns minus the premium with Lindsell Train

Lindsell Train Global Equity Fund offers cheaper access to its managers' skills than its sister investment trust
October 1, 2015

One of the most successful global investment trusts is Lindsell Train Investment Trust (LTI), which has made strong returns well in excess of the FTSE All-Share and FTSE World ex UK indices, and most of its sector peers over one, three and five years. However, a consequence of this good performance is that the trust now trades at an excessive premium to net asset value (NAV) of more than 25 per cent, a reason why we dropped this top performer in September from the IC Top 100 Funds (now free to view for registered users on our website).

IC TIP: Buy at 178p
Tip style
Growth
Risk rating
High
Timescale
Long Term
Bull points
  • Strong performance
  • Managers have good long-term record
  • Well positioned for current environment
  • Reasonable charges
Bear points
  • Short track record

However, if you are still keen to access the stock picking skills of its managers, Nick Train and Michael Lindsell, you could access them via an open-ended fund we have recently added to the IC Top 100 Funds - Lindsell Train Global Equity (IE00B3NS4D25).

The fund's performance is well in excess of its benchmark MSCI World Index over one and three years, and is the top performing fund in the Investment Association (IA) Global sector over one year, and fifth best over three years, out of more than 220 funds.

The fund aims for capital and income growth over the long term by constructing a concentrated portfolio of businesses with sustainable business models and or established resonant brands, which have demonstrated long-term durability in cash and profit generation.

Lindsell Train Global Equity looks well positioned for the current environment: its investments have little debt which its managers say is good with inflation still falling. It also doesn't hold oil and mining companies which have been hit badly by falling commodity prices. By contrast, its largest sector exposures are consumer discretionary and consumer staples, which should benefit as people need to spend less on energy and fuel and therefore have more disposable income. Consumer sectors account for about 70 per cent of the fund's assets.

"For users of commodities, whether companies or individuals, [falling commodity prices] are a boon," says Mr Lindsell. "Put simply, operating costs fall which helps margins and disposable incomes rise, thus encouraging more consumption. Provided that economies chug along, as they are doing today, lowly indebted consumer facing franchises should do even better in the future."

The fund can be picked up on platforms including Bestinvest.co.uk and Hargreaves Lansdown for a reasonable ongoing charge of less than 1 per cent, against 3.3 per cent (which includes a performance fee) for Lindsell Train Investment Trust.

Lindsell Train Global Equity was only launched four years ago so does not have a very long track record. It is also very concentrated with typically only 25 to 30 holdings: this increases its risk because if there is a problem with one holding this will have a greater effect on it than on a fund with a greater number of holdings. It is also not a mirror copy of Lindsell Train Investment Trust.

However, its managers have demonstrated their ability to make strong returns over longer periods with Lindsell Train Investment Trust and other funds, and proved their ability to run concentrated portfolios.

So if you want to access their stock picking skills, or were considering topping up an existing holding in Lindsell Train Investment Trust but don't want to pay an excessive premium to buy the shares, then Lindsell Train Global Equity Fund looks like a good option. Buy.

LINDSELL TRAIN GLOBAL EQUITY FUND (IE00B3NS4D25)

PRICE178pMEAN RETURN19.72%
IA SECTORGlobalSHARPE RATIO1.52
FUND TYPE Dublin domiciled open ended investment company STANDARD DEVIATION11.61%
FUND SIZE£1bnONGOING CHARGE0.83%
No of HOLDINGS26*YIELD0.95%
SET-UP DATE16 March 2011MORE DETAILSwww.lindselltrain.com
MANAGER START DATE16 March 2011

Source: Morningstar, *Lindsell Train

 

Performance

 1-year total return (%) 3-year cumulative total return (%) 
Lindsell Train Global Equity B16.161.9
IA Global sector average-2.225.5
MSCI World NR GBP-0.433.8

Source: Morningstar as at 29 September 2015

 

Top ten holdings as at 31 August 2015 (%)

Diageo8
Pearson8
Unilever8
Heineken Holdings7.5
Nintendo7
Walt Disney5
Intuit4.9
RELX Group4.9
Kao Corporation4.8
Mondelez4.8

 

Geographic breakdown (%)

Europe ex-UK13.2
Japan25.7
UK28.5
US31.3
Cash1.3