Nick Train’s Lindsell Train Global Equity fund downgraded after years of poor performance
A £4.2bn fund run by star manager Nick Train has been downgraded by data analytics company Morningstar.
The ‘process’ rating of the Lindsell Train Global Equity Fund, which is one of the largest in the UK, was downgraded from Above Average to Average by Morningstar today. The fund’s ‘people’ rating has retained its Above Average rating.
The fund has returned only 7.7 per cent in the last year, compared to the Investment Association’s Global benchmark return of 16.2 per cent.
The numbers look even worse over a longer period. The fund has returned just 13.8 per cent over the last five years, compared to a 49.4 per cent increase from the IA Global benchmark.
“Morningstar believes the competitive positioning of this fund has diminished,” the company wrote in a research note. “Unlike others, there is evidence of it consistently retaining underperforming assets and lacking sell discipline.”
As the global equity space has become more competitive in recent years, Morningstar argued that other managers have acted quicker and shifted their portfolios more successfully than Train.
Instead, it pointed to alternatives like Fundsmith Equity, the largest fund in the UK, and the Blackrock Unconstrained Equity Fund, which is managed by Train’s former employee Alistair Hibbert.
The fund’s permanent overweight position to poorly performing Japan and the UK has also played a role in the downgrade. Daniel Haydon, analyst at Morningstar, described its geographic bias as “painful”.
Train’s company, Lindsell Train, manages four funds, as well as the £1.5bn Finsbury Growth & Income trust, which has also come under fire for its weak performance over recent years.
“We still appreciate the fund’s defensive properties but, due to competition for capital in the portfolio, we believe it doesn’t stack up as well to the competition,” Haydon said.
“It is no longer clear how this fund could durably outperform the market, particularly when compared to other global equity quality-oriented managers.”
“We think there could be better consideration of opportunity costs and also better evaluation of management quality,” the analyst added.