FINSBURY GROWTH & INCOME: Full steam ahead as Nick Train's trust whistles Warren Buffett tune

Investment manager Nick Train is on a roll and his loyal investors are hoping the good times will not come to an end.

As long as one of his 26 holdings – most of which are UK-listed shares – does not fall out of bed between now and New Year’s Eve, Train’s Finsbury Growth & Income Trust is on course to outperform its benchmark, the FTSE All-Share Index, for a seventh consecutive year.

‘I’m flabbergasted,’ he admits. ‘It’s a record of outperformance that stretches for longer than any other I have experienced in more than 25 years of running money on behalf of investors.

‘It’s unprecedented and it will come to an end, as all runs do, but I’m enjoying it while it lasts.’

Player: Warren Buffett has inspired Nick Train

Player: Warren Buffett has inspired Nick Train

Over the past five years, the investment trust has delivered an overall return of 121 per cent, three times that of the All-Share. This record is better than any other UK equity income investment trust. The trust is so highly regarded that its shares trade at a premium to their underlying assets, indicating that buyers of the shares exceed those wanting to sell.

Train co-founded investment house Lindsell Train 15 years ago with Michael Lindsell. The two worked together at investment house GT before it was absorbed into what is today Invesco Perpetual.

Between them, they manage £5.6billion of assets across a range of investment funds, trusts and accounts for institutional clients. It’s a lean and mean investment machine, with Train and Lindsell – a specialist in Japanese equities – assisted by two other fund managers and a support team of ten.

Train is rare among fund managers, who are renowned for their brashness and propensity to make testosterone-charged decisions. He prefers to choose his companies carefully and then hold them long term. His offices are within a javelin’s throw of Buckingham Palace, so he is a step removed from the hustle, bustle and rumour mill of the City.

The ‘slow buy and hold’ strategy he employs is modelled on the approach of legendary American investor Warren Buffett. Indeed, it is rare for Train to change the composition of Finsbury’s portfolio, arguing that transactions are a ‘tax’ on investment returns.

Growth: Over the past five years, the investment trust has delivered an overall return of 121 per cent

Growth: Over the past five years, the investment trust has delivered an overall return of 121 per cent

‘The rest of the fund management industry is hyperactive when it comes to trading shares,’ he says.

‘We prefer to do as little as possible. One, because we don’t see ourselves as good traders. And, two, we like to buy good businesses and then hold them.’

In the past four years, Train has added only two companies to the trust – drinks giant Heineken in 2011 and more recently French company Remy Cointreau, famous for its Remy Martin cognac.

Train says: ‘We like businesses that have been around for decades. Some rivals take longevity as a given, but we think it is informative from an investment point of view. It implies a business is doing the right things.’

Among the portfolio are companies with dynastic family holdings – Remy Cointreau, investment house Schroders and the Daily Mail and General Trust, owner of The Mail on Sunday.

‘Our time horizon as an investor and that of families looking at dynastic business survival chime,’ he says. ‘Such businesses look ahead 30, 40 or 50 years into the future, not just 30 minutes ahead.’

Train is not infallible. One blemish is Finsbury’s income record, which does not compare well with that of rivals. This is because Train held shares in banking behemoth Lloyds during the 2008 financial crisis. The bank’s suspension of dividend payments in the aftermath of the world’s financial meltdown shrank Finsbury’s income pot.

It is only in the past four years that the trust has managed to consecutively increase dividend payments to shareholders. In contrast, nine other investment trusts have more than 40 consecutive years of income growth.

 

No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards.

By posting your comment you agree to our house rules.

Who is this week's top commenter? Find out now