Nick Train has revealed that Finsbury Growth & Income (FGT ) has finished selling its last holding listed outside the UK as part of a drive to revive performance. 

The milestone, reported at the £1.4bn trust’s annual general meeting in London today, is one of several steps taken after a frustrating period for shareholders, who have seen a 17% return over the past five years versus 33.1% for the FTSE All-Share index. 

In December’s annual results, the board promised to hold a continuation vote on the trust’s future following another 12 months of lagging the benchmark. 

Flashing up a chart of the trust’s historic returns, Train (pictured) said: ‘As I look at this slide I do not find myself in the mood for fuzzy nostalgia and I definitely don’t feel in the mood for any form of self-congratulation.’

Finsbury shares have still delivered triple the return of the FTSE 100 since the manager’s appointment in 2000, according to the latest factsheet.

But in a mode that has by now become familiar, Train addressed the trust’s ‘very disappointing’ recent returns head on.

‘I sort of feel I’m running out of ways to say sorry,’ he said. 

The manager, who runs Lindsell Train’s £2.7bn open-ended UK Equity fund along similar lines, added that he ‘was ashamed to admit’ that Finsbury’s share price high came as long ago as 2019. Although, the net asset value (NAV) of the underlying portfolio has recently set new highs. 

Train outlined how he and deputy manager Madeline Wright had responded to this difficult period of performance that followed with a ‘marked shift’ in the portfolio. 

Since June 2019, the managers have cut holdings in non-UK shares – a flexibility Train had long made use of  – from 18% of the portfolio to zero as of two weeks ago.

While those sales were already in progress by the final quarter of last year, as recently as the start of 2024 Finsbury still held a combined 17.8% across Heineken, Cadbury owner Mondelez and Remy Cointreau, according to Morningstar data. 

Some of those proceeds have been recycled into a new pair of recently revealed holdings: testing company Intertek and shipbroker Clarksons, which Train hinted they had started to look at more closely after an FGT shareholder mentioned its unique dataset last year. 

To revive performance, Train said they needed either their holdings or the FTSE to do better, which he hopes ‘is not a hopeless prospect’. 

‘We’ve responded to [the] disappointing UK stock market performance by buying more of it,’ said Train, who also spoke to what he sees as the improving profile of the FTSE 100, with more ‘digital winners’ and slightly less emphasis on so-called old economy sectors like oil and banking. 

‘Today the UK stock market is considerably more growthy than it’s been in the past,’ said the Lindsell Train co-founder. 

Two-thirds digital

Finsbury’s increasing weighting in ‘digital winners’ – such as top three holdings London Stock Exchange Group (LSEG), Relx and Sage – represents another shift. Companies which Lindsell Train puts in that digital bucket represent nearly two-thirds of the portfolio today, at 64%, versus 40% in 2019. 

‘All of us need to learn the lessons of value creation delivered by the Nasdaq over the last decade or more… Big digital companies have carried on winning and getting bigger,’ he said.

He referenced that LSEG and Relx have both outperformed the main Nasdaq index so far this century. 

Another theme of the presentation was Finsbury’s extreme concentration, a subject which attracted several critical shareholder questions. 

The top 10 holdings account for around 92% of the portfolio, something Train said was only possible because of the investment trust structure. 

‘This concentration is why I am so happy to take the risk of being invested in Finsbury’s portfolio,’ said the manager. 

He did acknowledge that concentration ‘cuts both ways’. Burberry is one example of the risks associated with big positions after a rollercoaster year. Albeit, after some recovery, its shares are now down a milder 16.5% over 12 months. 

Ultimately, Train sees FGT’s concentration as storing up the potential for the closed-ended fund to perform ‘very differently’ and hopefully  ‘very much better from here’.

Train has agreed with the board to trim positions once they pass a 12.5% weighting. 

Views on HL sale

One shareholder question at the AGM focused on long-time holding Hargreaves Lansdown, still a 5.9% position, asking why the managers had not been vocal in pushing for its imminent £5.4bn sale to private equity to achieve a higher valuation. 

Train’s public comments during the protracted bidding process were largely restricted to oblique references in fund factsheets, in contrast to some other shareholders’ vocal resistance.

‘Once the two founders had publicly committed to sell we knew that the status quo of [Hargreaves Lansdown] was untenable,’ said Train.

Founders Peter Hargreaves and Stephen Lansdown still owned around a quarter of the investment platform at the time of the bid. Train suggested their dual public support meant that HL was then clearly ‘in play’, and it became a question of what price would be achieved rather than whether a sale would take place. 

The fund manager assured shareholders that to ‘the extent of our abilities’, Lindsell Train pushed for a higher offer, but none was forthcoming during what he called a ‘price-finding’ period. 

‘Reluctantly I have to acknowledge in a price-finding market that the price being offered must be fair,’ added Train.