Nick Train says the performance of his popular Finsbury Growth & Income investment trust has picked up after the value rally ran out of steam in spring.
The £2billion trust run by Train – who is one of Britain’s best-known fund managers – has a concentrated portfolio of up to 30 companies. It took a hit earlier this year as the vaccine rally sent previously struggling shares soaring.
Train said: ‘A simple and broadly accurate way of understanding our performance so far in 2021 is to propose that we underperformed during the first quarter because investors were chasing beaten-up UK value and recovery stocks – which we do not own.
‘However, as the year has progressed, many of our longstanding holdings in growth companies have begun to perform better – either because their underlying business growth rate has accelerated or because it transpires they were worse hit by the pandemic than understood and have enjoyed their own “recovery” bounce.’
Nick Train manages the £2billion Finsbury Growth & Income investment trust
Finsbury Growth & Income’s portfolio features many household name companies with a quality and growth tilt, ranging from Guinness-maker drinks giant Diageo, to consumer brands colussus Unilever, the London Stock Exchange, and DIY investing platform leader Hargreaves Lansdown.
The investment trust’s share price climbed 2.7 per cent between the start of the year and end of June, while its net asset value rose 7.3 per cent, but this lagged its benchmark FTSE All-Share index’s return of 11.1 per cent.
Over year to 30 June 2021, Finsbury Growth & Income saw a share price total return of 9.5 per cent compared to the FTSE All-Share’s 21.5 per cent total return.
However, much of that lag has come due to the vaccine rally in cheap beaten-up stocks, and in the 2020 calendar year Finsbury Growth & Income fell just 2 per cent compared to the FTSE All-Share’s minus 9.9 per cent return.
Train noted there have been strong share price gains from some of the companies held in the trust in the second quarter of the year, between April and June, largely digital companies and premium consumer brands.
Newcastle-based software company Sage rose 12 per cent in the period, while Experian, DMGT (This is Money’s parent group) and RELX outperformed the market with gains of 7 per cent.
Meanwhile Diageo rose 16 per cent, Fever-Tree 21 per cent, Remy Cointreau 11 per cent, Burberry 9 per cent and Heineken jumped 13 per cent.
Similarly Cadbury and Oreos owner Mondelez rose 7 per cent over the quarter hitting an all-time share price high.
One long term theme for Finsbury Growth & Income is the UK wealth management sector
Another long-term theme for Finsbury Growth & Income is wealth management, where Train said there are ‘big growth and consolidation opportunities in the UK’.
Two of the three holdings undeperformed in the second quarter: Hargreaves Lansdown and Schroders, up 3 per cent and 0.4 per cent respectively.
The other, Rathbones, rose nearly 6 per cent after its £150m deal to buy financial planning business Saunderson House, which has £4.7bn in assets under management.
Train said JP Morgan’s recent acquisition of robo-adviser Nutmeg, which provides simplified investment advice, confirms at least one global bank sees opportunity in the UK wealth industry.
‘JP Morgan’s entry into the space is a reminder of the joint venture Schroders has established with Lloyds Bank, which we hope will become a source of strong marginal asset growth,’ Train said.
‘Meanwhile, at a slight tangent, the confirmation that Schroders considered a merger with M&G is indicative of the consolidation options being considered by boards across the industry.’
Finsbury Growth & Income (red line) was beating the sector average trust (blue line) over the past 12 months until the vaccine rally kicked in from November last year, AIC figures show
Over the past decade, however, Finsbury Growth & Income (red) has comfortably beaten the sector average performance (blue)
While Finsbury Growth & Income’s performance has improved after lagging the stock market bounce back for much of the past year, it could be tested further if inflation fears prompt another growth stocks sell-off.
However, the trust’s heavy weighting towards consumer goods and financials could mean that it proves to be a winner from inflation, as many of its big brand holdings have considerable pricing power. The trust has 49.8 per cent of its investments in consumer staples, 25 per cent in financials and 17.6 per cent in conmsumer discretionary.
The trust sits within the AIC’s UK Equity Income sector but currently yields just 1.9 per cent, compared to the sector average of 3.8 per cent, due to Finsbury Growth & Income’s more growth-orientated investing approach.
The top performing major trusts investing in UK companies in the sector over the past year have been Gervais Williams’ more small and medium-cap focussed Diverse Income Trust, up 46.6 per cent, and the value-orientated Merchants trust, up 46.1 per cent, Lowland trust, up 44.4 per cent, and Temple Bar, up 43.3 per cent.
Finsbury Growth and Income, which has an ongoing charges figure of 0.6 per cent, is the ninth best performer in the sector over five years, up 56.8 per cent, compared to a 40.7 per cent sector average.