Nick Train and Terry Smith: can pair recover former performance glory?

How the mighty have fallen. Nick Train and Terry Smith were once the stars of the UK’s fund management sector, presiding over investment vehicles that delivered a string of stellar returns. Today, by contrast, their track records look much less impressive, with recent dips in performance now taking their toll on long-term returns. The question for investors is whether Train and Smith can bounce back – or whether this is a familiar story of stars that have shone too brightly.

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All investment funds come with ups and downs, but managers ask to be judged on their long-term track records. In which case, the verdict on these star managers looks damning. Their flagship funds – WS Lindsell Train UK Equity, Lindsell Train Global Equity and Fundsmith Equity – all now sit in the fourth quartile of their performance tables over the past five years. In other words, you’d have been better off, over this period, if you’d put your money into at least three-quarters of their competitors.

Nor is the story much better over even longer periods that take in the heydays of Train and Smith. In July, Lindsell Train UK Equity dropped into the second quartile over 10 years for the first time in its history, while Lindsell Train Global Equity slid into the third quartile. Fundsmith Equity has held on but hasn’t delivered a top-quartile performance in any single year since 2019.

Both managers know investors are unimpressed. Train has repeatedly apologised for his funds’ lacklustre returns and recently described the past few years as “among the most disappointing of my career”. Smith has acknowledged his underperformance but asked investors to remain patient and to focus on his long-term record.

What’s gone wrong?

In part, both fund managers are victims of the fickleness of markets, with shifting economic drivers and political factors prompting investors to turn their back on previously dependable strategies. But Train and Smith have also made decisions about individual stocks that, in retrospect, they may regret.

For Train and his investors, the challenges have certainly been two-fold. Most obviously, Train’s favoured style of investment has fallen out of fashion. He’s long been regarded as a “growth” or “quality” investor – that is, an investor who looks to buy high-calibre companies with very strong long-term growth potential. In recent times – and particularly this year – this approach has underperformed strategies such as “value” investing, focused on companies delivering commercial returns today, rather than those that promise much in the future.

Many investors will feel it is to Train’s credit that he’s stuck by his principles – and investment is a cyclical endeavour; growth investment will undoubtedly make a comeback at some stage.

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Less happily, however, Train’s funds have, by his own admission, also suffered from disappointing stock selection decisions. He has preferred consumer companies over winners in the digital market, for example, adding examples of the latter such as Experian (LSE:EXPN) and RELX (LSE:REL) somewhat belatedly. He’s also stuck by persistent underperformers such as Diageo (LSE:DGE). Given Train’s strategy of maintaining concentrated portfolios comprising relatively few stocks, there is little room for such mis-steps.

It’s been a broadly similar story for Smith, who has also tended to favour high-quality growth businesses during his investment career, and to build relatively concentrated portfolios.

One problem for investors has been Smith’s aversion to some of the “Magnificent Seven” technology businesses in the US, which have delivered such strong returns in recent years; he’s opted to steer clear of artificial intelligence (AI) chipmaker NVIDIA Corp (NASDAQ:NVDA), missing the opportunity to benefit from its stellar performance, and sold out of Apple Inc (NASDAQ:AAPL) only to see its shares rise sharply. A significant holding in Novo Nordisk AS ADR (NYSE:NVO), the manufacturer of Ozempic and Wegovy, has also proved troublesome, with the company struggling to keep pace with demand for weight-loss drugs.

All of which begs the question of where these funds go from here – and how investors should view them. Do existing investors stick around in the hope of a recovery or move on before performance slips further? Should potential investors capitalise on the opportunity to buy at a low point or steer clear?

At interactive investor, Alex Watts, senior investment analyst notes that both Fundsmith Equity and Lindsell Train UK Equity remain on the Super 60 roster of recommended funds, although Lindsell Train Global Equity is not included. “Neither portfolio is expected to outperform in all market conditions and sometimes quality growth investing will underperform other approaches,” Watts warns, although he pays tribute, in particular, to the “disciplined approach and vast experience of Smith”.

On the other hand, Ben Yearsley, an investment consultant at Fairview Investing, is more inclined to give Train the benefit of the doubt. “I’ve backed Nick for many years and he’s approachable and fascinating to talk to,” Yearsley argues. “I’d also argue that he is more prepared to change views and adapt to a changing environment.”

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By contrast, other financial advisers are moving on. “I have previously used these funds, and particularly Fundsmith, but I just feel that for now, the ship has sailed,” says Philippa Gee, managing director of Philippa Gee Wealth Management. She is particularly concerned about the high US exposure of Fundsmith Equity; that has cost the fund dearly this year because of the weakness of the dollar, and many analysts worry that an end to US exceptionalism does not bode well for the future. “I see the US market changing so much,” Gee adds.

Scott Gallacher, a chartered financial planner and director at Rowley Turton, is also concerned. “The key for investors is to revisit why they bought into these funds in the first place,” he says. “If those reasons no longer stack up, then it may be time to reconsider their position.”

Gallacher argues that following star managers is always fraught with risk. “The problem is that many investors only buy in after the strong performance has already been delivered; by then, you may already have missed their outperformance.”

Investmentstyle

The question for investors in that case is whether the style of investing that Train and Smith practice is of appeal. Both managers’ high-conviction focus on quality companies with growth potential leaves them exposed in periods when the market is looking elsewhere – but well placed to benefit at other times.

The data presents a mixed picture. A study from Dimensional suggests that if you go all the way back to 1927, value stocks have outperformed growth stocks – at least in the US – by an average of 4.4% a year. But the story is inconsistent. For example, over 10 years to the end of 2021, Vanguard analysis shows that US growth stocks outperformed US value stocks by 7.8% annually. This was the period in which Train and Smith were flying high.

Historically, value stocks tend to have outperformed during periods of rising interest rates, higher inflation or heightened risk of recession. That has been the prevailing environment of 2025, although the outlook for 2026 and beyond looks tougher to call.

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Hedge your bets, suggests Ben Yearsley. “I don’t have a problem with managers sticking to their views and convictions, as long as that fund isn’t the only one an investor holds,” he says. “It makes sense to hold funds with different styles.”

Alternatively, look for a compromise option, suggests ii’s Alex Watts, who highlights a couple of funds that exhibit some of the qualities of Train and Smith, but without their concentrated focus.

“Brunner Ord (LSE:BUT) Investment Trust is managed by Julian Bishop and Christian Schneider, and blends quality, value and growth investing in a diversified portfolio,” Watts says. “The focus is on investing in quality-growth companies, but with an eye on valuation and growing income distribution.”

“Alternatively, the large multi-manager F&C Investment Trust Ord (LSE:FCIT)is a compelling option as a one-stop shop for global equity exposure and is very diversified with around 400 holdings,” Watts adds. “It offers a blend of investment styles and diversified exposure to best-in-class external and in-house managers.”