Nick Train's Investment Trust Continues, Despite Underperformance
Finsbury Growth & Income (LSE:FGT) shareholders have shown their confidence in manager Nick Train, as the investment trust comfortably passed its continuation vote. This vote is a crucial test of investor satisfaction and trust in the fund's management.
Train, a renowned UK fund manager, has faced criticism for underperforming the UK stock market for five consecutive years. Despite this, the trust's board, including Train and fellow founder Michael Lindsell, abstained from voting their shares, indicating their support for the trust's continuation. The trust's performance has been a topic of concern, with a 6.4% share price total return over the past five years, significantly lower than the 60.4% return of the Association of Investment Companies (AIC) UK Equity Income sector.
However, the trust's performance over the long term has been impressive. Since Train's appointment, the trust has achieved a 706.4% share price total return, outpacing the FTSE All-Share Index's 328.3% return. This success is attributed to Train's investment strategy, which focuses on well-established growth companies with strong market positions, intellectual property, and captive customer bases.
The continuation vote is a significant feature of investment trusts, allowing shareholders to assess the trust's management and performance. If the vote had failed, the trust's board would have had to consider alternative management options, potentially leading to Train's removal. This vote is a rare opportunity for shareholders to have a say in the trust's future direction.
Train's investment approach is characterized by a concentrated portfolio of around 20-25 shares, with the top 10 positions accounting for 86.7% of the portfolio. This strategy has led to a strong performance, with the top three positions being Sage Group, Experian, and London Stock Exchange Group. However, the trust's performance has been influenced by its largest holdings, with Diageo, the sixth-largest position, contributing 8.9% to the portfolio.
Despite the recent underperformance, Train remains a buy-and-hold investor, with a focus on long-term growth. He has introduced new holdings, such as Auto Trader Group, Games Workshop Group, Intertek Group, and Clarkson, to diversify the trust's portfolio. This active approach has been a topic of discussion, with some investors questioning the trust's performance and management.
The continuation vote is a testament to the trust's resilience and the confidence of its shareholders. It highlights the importance of investor feedback and the trust's commitment to maintaining a high-quality investment process. As the trust continues its journey, shareholders will have the opportunity to further engage and influence its future direction.
