Star stockpicker Lindsell kicks off buyback to prop up flagging trust
The manager of one of Britain’s best-known investment boutiques has bought nearly £150,000 worth of shares in his investment trust as part of a programme to boost its valuation and show faith in his approach after years of underperformance.
Michael Lindsell, who along with star stockpicker Nick Train manages the £115m Lindsell Train Investment Trust, bought 25,000 shares in the closed-end fund at an average valuation of 580p on Monday, according to a stock exchange filing.
The £144,940 purchase forms part of a pivotal tender offer announced by the trust on Friday, in which the board gave investors the opportunity to offload their shares at a valuation above their heavily discounted stock market price.
In its statement announcing the plan, the Lindsell Train trust’s directors conceded that the past five years of performance had been “disappointing”.
“Notwithstanding this, the board continues to have confidence in the company’s investment approach and the quality of its portfolio,” they said.
Lindsell Train struggles to revive fund
Over the period, its net asset value (NAV) – the total value of assets held in the trust’s portfolio – has shed 7.1 per cent every year, with holdings in the likes of Nintendo and Universal Music Group weighing on the fund’s performance in recent months. The languid performance of Lindsell’s asset management company, Lindsell Train Limited, has also dragged on the trust.
Its shares are also trading at a hefty 17.7 per cent discount to the closed-end fund’s NAV and, despite an impressive long-term track record, are down over 60 per cent in the past half-decade.
As part of its Friday update, the board offered to buy back up to a fifth of the trust’s shares at a cut-price discount of just five per cent to NAV. The move was “the most appropriate course of action to seek to narrow the discount”, the group said. It also “allowed time for the investment manager’s strategy to deliver improved performance”.
Lindsell’s buyback, which took place over three transactions on Monday, is part of an effort to ensure Lindsell Train Limited’s relative holding of the trust remains at a similar level and does not hold too many of the shares in circulation.
The company, which is made up of two flagship funds that focus on UK and foreign equities, shot to prominence in the early 2000s after making string of hugely successful bets on so-called quality companies. With the philosophy, which backs cash generative, inexpensive firms with little debt, it returned 1,300 per cent between 2000 and its record high in 2019. Since then its shares have fallen over 70 per cent.
Train also manages the 100-year-old Finsbury Growth and Income trust, which invests purely in London-listed companies. The trust has also underperformed relative to peers over the past five years, prompting it to call a continuation vote on Train’s position as manager earlier this year.
The stockpicker passed it resoundingly, with more than 97 per cent of shareholders backing him to remain in place. Earlier this year, he also bought up £200,000 in Finsbury, in bid to show shareholders he had faith his fund would turn a corner.
“We believe this structure strikes the right balance between the interests of shareholders seeking an exit and those who remain confident in the long-term proposition,” Roger Lambert, chair of the Lindsell Train Investment Trust, said on Friday when announcing the buyback programme. “It reflects both our conviction in the company’s future and our commitment to clear accountability to shareholders.