Formal review concluded. This Super 60 Fund is retained. Find out more
| Asset Group | Asset Sub-Group | Investment Category |
| Equities | UK equities | Core |
Manager Nick Train started his career as an investment manager at GT Management in 1981 and established Lindsell Train in 2000 together with his colleague Michael Lindsell. Train has run this fund since launch in 2006 but has a track record going back to 2000 on Finsbury Growth and Income, a closed-end fund managed to the same mandate. Train is supported by three analysts and although the team is small, we believe it is sufficient given the concentrated portfolio and high degree of expertise. The fund aims to outperform the FTSE All-Share Index by investing in high-quality stocks with durable, cash-generative franchises that can prosper through multiple business cycles. Train targets companies that fulfil strict criteria, including a proven track record, a large and growing business franchise, high barriers to entry, strong financial characteristics (including net cash on the balance sheet), a track record of producing a high return on capital, and low capital intensity. Once filtered on these characteristics, the investable universe is narrowed to around 100 names. These are subject to in-depth fundamental analysis, and while the focus is on quality, Nick Train is also aware of valuation. The manager employs three main measures here: discounted cash flow, enterprise value/sales, and a multiple comparison with transactions on similar companies. He tries to identify companies trading at a discount to their intrinsic value and will often make a purchase when a company is experiencing temporary problems. He almost exclusively invests in firms that he would like to own in perpetuity. Opinion The fund will face headwinds if any of the sectors to which it is underweight outperform (and vice versa). It will also typically underperform in strongly rising (often macro- or low-quality-driven) markets. The size of the fund is also a potential issue. When funds attract a large amount of money it can be more difficult for a fund manager to stay true to the investment process. Due to this Morningstar Research Analyst's overall level of conviction in the fund was reduced from Gold to Bronze in December 2019. The fund was re-rated to Silver in December 2021 January 2023 | ||
The LF Lindsell Train UK Equity fund is included in the ii Super 60 list of rated funds as a core holding in the UK equity category.
In line with our stated methodology, Lindsell Train UK Equity was put under formal review on 29 November 2019 after being downgraded by two independent external agencies. Given its highly concentrated nature, we wanted to reassure ourselves that there had been no deterioration in liquidity.
The interactive investor selection team conducted extensive analysis on the liquidity, capacity and concentration of Lindsell Train UK Equity, and spoke to the fund manager at length. The key outcome is that our investment selection committee is comfortable with the liquidity of the fund, it has been removed from being under formal review, and it will remain on our Super 60 list. The majority of the holdings are large, liquid companies with diversified revenue streams. In terms of capacity, there is plenty of room for further growth without compromising the mandate. The fund has always had a concentrated, high conviction approach but has a low turnover and long-term successful track record.
(19 January 2020)
Risk warnings
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Formal review concluded. This Super 60 Fund is retained. Find out more