Nick Train is feeling optimistic about the companies held in the Lindsell Train UK Equity fund as it swung back to outperforming its index.
The fund saw a 3 per cent total return in February this year, compared with the FTSE All Share posting a 1.3 per cent return.
This marks a turn in fortune for the fund manager, whose fund had suffered a -7.6 per cent return relative to its benchmark for the year to the end of February.
In a monthly report to investors, Train and Madeline Wright, a deputy portfolio manager at Lindsell Train, said there was “hope” in the continuing mismatch between the business performance of companies in the fund’s portfolio and their share price.
Train said 75 per cent of the fund’s portfolio was either conducting a share buyback, had recently completed a buyback or had announced a special dividend, because of unexpectedly strong cash generation.
“This willingness to invest in themselves highlights the mismatch between the positive business progress being reported by our portfolio companies and their often lacklustre share prices and bargain valuations,” he said.
“This mismatch seems as wide as ever and represents an opportunity, we hope.”
Train echoed the views he expressed in December last year, that “mega-trends” in global equity markets will continue, with digital technology creating more wealth around the world and the demand for luxury and aspirational products intensifying.
“We see this as a hugely encouraging backdrop for investing in equities.
“And the UK Equity market can give exposure to those likely drivers of global growth from valuations that are demonstrably lower than for global peers.”
In early January, Train said the opportunities for investment in the UK equity market were “hugely encouraging”, despite his UK equity fund's underperformance and the outflows seen from these assets in recent years.
The Lindsell Train UK Equity fund made a 5.9 per cent loss for the month to January 31, compared with the FTSE All Share Index’s 0.3 per cent loss.
Cruelty and waste of war
Train said he was sorry that the world has been reminded of the “cruelty and waste” of war, and said the fluctuations of asset prices seemed inconsequential in the face of suffering.
“It has been hateful watching events unfold and I feel almost a sense of shame in having to respond to those events as a portfolio manager,” he said, adding despite this, the fund’s responsibility for its clients’ capital was not diminished by the advent of war.
“Indeed in such emotionally charged circumstances our responsibility is even weightier – if only because it is so much easier to make reflexive or irrational decisions when others are panicking (even more so, if you yourself are panicking).”
sally.hickey@ft.com
