Lindsell Train Global Equity - growth from unexpected places
Jonathon Curtis | Wed 23 January 2019
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- Dividend growth’s made up most of the fund’s overall returns since launch.
- The managers like companies that can cope with changes in technology.
- It performed well over 2018 when many other funds struggled.
Our view
Fund managers Michael Lindsell, Nick Train and James Bullock have become firmly established as investor favourites. They’ve done it by keeping things simple. They invest in a small number of companies they think are exceptional and hold them, ideally, forever. It’s hard to find more dedicated buy-and-hold investors.
We like their straightforward approach, long-term outlook, and commitment to their philosophy. They’ve shown their ability to add value for investors over many years. Our analysis suggests this is largely down to their stock picking skills. We expect the managers to keep doing an excellent job for investors, although there are no guarantees. The fund deserves its place on the Wealth 50 list of our favourite funds.
How’s the fund performed?
The fund’s long-term performance has been excellent. Since it launched in March 2011 it’s grown 249.5%* compared with 119.3% for the broader global market.
The managers look for companies they think can grow their earnings year after year. That could help support both share price and dividend growth. In fact, dividend growth’s contributed more to the fund’s overall long-term returns than growth in capital values. Future dividends aren't guaranteed though.
The fund also performed particularly well last year and grew 11.1% to 31 December 2018, when most other Global funds lost money. How the fund’s performed in the past doesn’t indicate or guarantee how it’ll do in the future.
A big part of last year’s performance was down to companies like sports entertainment company WWE, whose share price doubled in 2018, and education publisher Pearson, who’s struggled for a long time but grew 30%. Fund stalwarts Unilever and Diageo also did better than the broader consumer goods sector.
Not all companies in the fund have done well though. Shares in Nintendo, the Japanese computer game developer, fell in value. eBay also struggled, as the company’s not grown its users as much as expected.
Lindsell Train Global Equity performance since launch
Past performance is not a guide to the future. Source: Lipper IM to 31/12/2018
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Dec 13 -
Dec 14 |
Dec 14 -
Dec 15 |
Dec 15 -
Dec 16 |
Dec 16 -
Dec 17 |
Dec 17 -
Dec 18 |
|
| Lindsell Train Global Equity | 10.5% | 19.5% | 23.8% | 26.1% | 11.1% |
| FTSE All World | 11.3% | 4.3% | 29.6% | 13.3% | -3.1% |
Past performance is not a guide to the future. Source: *Lipper IM to 31/12/2018
How do the managers invest?
When judging companies, there are three main things that are important to the managers. They consider whether a company’s stood the test of time. They look for those that have a strong brand or business model. And perhaps most importantly, they search for companies they expect to keep doing well for decades to come.
They prefer to keep hold of an investment in the hope that it steadily grows, rather than try to make a quick profit from a company they're less certain about. In 2018, they didn’t invest in any new companies and only sold one, Dr Pepper Snapple, as it was taken over and had made healthy gains by that point.
They think there are only a few great businesses out there, so they invest in a relatively small number of companies. That means each one can have a meaningful impact on performance. But it’s a higher-risk approach than a more diversified one. Some of the businesses the managers invest in are smaller companies, which also adds risk.
US companies make up more of the fund than any other country, followed by the UK and Japan. But this isn’t because of their outlook for the US, UK and Japanese economies. It’s because of their outlook for certain companies that happen to be based in those countries.
Managers’ outlook
Short-term news and events don’t interest Lindsell, Train and Bullock. Some investors worry about interest rate rises or trade skirmishes, for example. But the managers are happy to let the companies they invest in deal with these issues and potentially watch them grow over the long run.
The thing they think about most is how technology will impact companies in the future, for better and for worse. They think their portfolio of mainly big, industry-leading companies will cope well though. In their view medium-sized businesses will be most negatively affected by the smaller, innovative disruptors. They believe the brand strength of their companies should give them better resilience, and their scale should give them more resources to become tech-savvy themselves.
Please note charges can be taken from capital which can increase the yield but reduces the potential for capital growth. This is an offshore fund so investors aren’t normally entitled to compensation through the Financial Services Compensation Scheme.
The fund currently has a holding in Hargreaves Lansdown plc.
Find out more about Lindsell Train Global Equity fund including charges