Lindsell
Train
Global
Equity’s
distinct
investment
philosophy
is
attractive,
and
the
fund
continues
to
benefit
from
some
veteran
comanagers.
However,
conviction
in
the
application
of
the
process
has
diminished.
We
think
there
could
be
better
consideration
of
opportunity
costs
and
also
better
evaluation
of
management
quality.
The
geographic
biases
have
also
proved
painful.
Nonetheless,
we
recognise
the
helpful
defensive
qualities
of
the
fund,
which
can
serve
a
useful
role
within
a
diversified
portfolio.
We
also
appreciate
that
narrow
market
leadership
has
been
unkind
to
the
fund
in
recent
years.
This
has
not
been
the
only
negative
factor,
and
we
think
the
fund’s
competitive
positioning
within
its
cohort
has
diminished.
This
leads
to
a
downgrade
to
the
Process
Pillar
rating
to
Average
from
Above
Average.
The
People
Pillar
retains
its
Above
Average
rating.
What
do
Morningstar
Analysts
Say
About
Nick
Train?
Lindsell
Train
co-founders
Michael
Lindsell
and
Nick
Train
apply
their
investment
approach
to
a
global
opportunity
set.
Both
have
more
than
30
years’
experience,
including
several
years
managing
global
equity
portfolios
prior
to
launching
this
strategy
in
2011.
They
are
joined
by
co-manager
James
Bullock;
while
less
experienced,
he
has
been
contributing
to
the
portfolio
since
joining
Lindsell
Train
in
2010.
The
investment
philosophy
lies
in
the
belief
that
a
highly-concentrated
portfolio
of
high-quality,
cash-generative,
strong,
and
easily-understood
business
franchises
will
outperform
the
market
and
reduce
volatility
over
the
long
term.
The
managers
use
strict
criteria
aligned
to
this
belief
to
significantly
pare
down
the
universe.
Qualifying
stocks
are
subject
to
in-depth
fundamental
analysis
by
the
managers
and
four
supporting
analysts.
Given
the
restricted
investable
universe
and
the
managers’
long
experience,
we
find
the
team
sufficiently
resourced.
A
strength
resides
in
Lindsell
and
Train’s
deep
understanding
of
company
strategy
and
the
value
of
intellectual
property.
The
managers’
ability
to
see
through
the
noise
and
hold
stocks
that
are
best
placed
to
defend
their
business
over
the
long
term
has
long
been
seen
as
a
key
positive,
but
the
buy
and
hold
approach
is
accompanied
by
considerations
relating
to
sell
discipline,
and
this
has
proved
painful
more
recently
when
opportunity
cost
is
considered.
This
is
made
more
important
by
the
highly-concentrated,
stock-specific,
and
unconstrained
approach.
The
sizeable
regional
and
sector
deviations
from
the
category
index
have
long
been
a
feature,
and
the
UK
and
Japan
have
been
permanent
overweightings.
Elsewhere,
there
is
a
low
technology
weighting,
given
that
the
managers
feel
these
relatively
newer
businesses
can
significantly
change
their
strategies
as
they
develop.
They
prefer
firms
with
a
long
and
consistent
heritage
and
strong
brands
or
intellectual
property.
At
times,
companies’
strategic
mishaps
have
hampered
the
ability
for
the
fund
to
fully
capture
the
long-term
value
from
this.
Which
Stocks
Are
Causing
Nick
Train’s
Fund
Problems?
Recent
performance
has
failed
to
keep
up
with
the
category
or
global
growth
indexes.
Some
of
this
is
explainable:
naturally,
the
fund
is
not
exposed
to
the
very
high
growth
stocks
that
have
led
the
market.
There
has,
nonetheless,
been
a
negative
relative
impact
from
areas
of
the
portfolio.
That
includes
Japanese
holdings
in
consumer
staples
companies
that
have
been
hit
by
the
double-edged
sword
of
Japanese
yen
depreciation
and
weakness
in
their
exposure
to
the
China
consumer.
This
may
prove
to
be
cyclical
but
has
been
very
painful.
Elsewhere,
long-standing
holdings
in
beverage
companies
Diageo
(DGE)
and
Brown
Forman
(BF.B)
detracted.
They
faced
stocking
issues
that
some
argue
are
symptomatic
of
changing
consumer
habits,
large
margins.
Holdings
in
Hargreaves
Lansdown
(HL.)
and
the
position
in
Pearson
sold
in
2022
have
also
weighed
on
returns.
We
recognise
that
some
positions
have
worked
very
well
over
the
last
five
years,
however,
including
Nintendo
(7974),
Intuit
(INTU),
London
Stock
Exchange
Group
(LSEG),
RELX
(REL),
and
FICO
(FICO).
After
years
of
significant
net
inflows,
the
strategy
experienced
net
outflows
in
recent
years.
This
brings
with
it
different
behavioral
biases,
which
we
monitor.
Assets
(including
segregated
mandates)
stood
at
around
£8.6
billion
at
the
end
of
May
2024.
Considerations
on
capacity
are
less
prominent
now
than
they
once
were.
The
managers’
ability
to
execute
the
process
and
their
approach
to
competition
for
capital
in
the
fund
still
require
monitoring.
Daniel
Haydon
is
a
manager
research
analyst
at
Morningstar
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