A Vote of Confidence for Nick Train's Investment Trust
In a recent development that has sparked interest in the investment world, shareholders of Finsbury Growth & Income have overwhelmingly supported the continuation of Nick Train's management. This decision comes despite Train's underperformance against the UK stock market for five consecutive years.
Train, a renowned UK fund manager, abstained from voting his shares, but his co-founder, Michael Lindsell, fully backed the trust's continuation. With 97.2% of votes in favor, Train will continue his investment strategy, focusing on well-established growth companies with dominant market positions.
But here's where it gets controversial... Train's approach, targeting high-quality growth stocks, has faced scrutiny due to its recent performance. Despite apologizing for underperforming, Train's trust has delivered a 6.4% share price total return, significantly lagging behind the 60.4% growth of the AIC UK Equity Income sector over the past five years.
And this is the part most people miss... Train's 10-year performance record also lags behind the UK Equity Income sector, with Finsbury Growth & Income's share price total return at 83.6% compared to 126.2% for the sector.
In a revealing interview, Train attributed some of his underperformance to "subsequent disappointments" among his previously successful holdings, such as Diageo.
Train's concentrated portfolio, consisting of around 20 to 25 shares, is heavily influenced by its largest positions. The top three holdings, Sage Group, Experian, and London Stock Exchange Group, account for a third of the trust. Diageo, the sixth-largest position, represents 8.9% of the portfolio.
Despite recent challenges, Train's long-term track record is impressive. Over his 25-year tenure, he has comfortably outperformed the market, with a share price total return of 706.4% compared to 328.3% for the FTSE All-Share Index. This clearly demonstrates the value of his patient and high-conviction investment process.
The continuation vote was a critical moment for investors to assess Train's approach. If it had failed, the trust's board would have been forced to consider alternative management options, potentially leading to Train's removal.
Continuation votes are a unique feature of investment trusts, occurring annually or every two, three, or five years. They are often triggered by persistent poor performance or long periods of trading at a wide discount.
In the past, high-profile investment trusts like Schroders Capital Global Innov Trust and JPMorgan Global Core Real Assets have failed continuation votes due to disappointing performance.
Investment trusts differ from funds in several ways, including their independent boards of directors. These boards provide oversight, hold fund managers accountable, and work to reduce costs for shareholders.
As a shareholder in an investment trust, you have the power to vote and influence decisions. This level of involvement is not typically available with funds, where your main option is to "vote with your feet" if you're unhappy.
So, while Train's trust has faced challenges, his long-term success and the support of shareholders demonstrate the value of his approach. The continuation vote has allowed investors to have their say and ensure the trust's future is aligned with their interests.
What do you think? Is Train's strategy worth sticking with, or should investors seek alternative options? Share your thoughts in the comments below!
