Hargreaves Lansdown has highlighted recent underperformance in the Lindsell Train Global Equity fund in a review of the fund it knocked out of the former Wealth 50 last year.
Over the last year, the £7.9bn fund has returned 1.8% compared to 5.9% returns in the MSCI World Index (developed markets) against which it is benchmarked. That is despite the fund gaining ground during the coronavirus pandemic.
“Some investments in consumer companies have held back performance, as has investing less in the strong-performing technology sector than the broader global stock market,” said Hargreaves Lansdown analyst Jonathon Curtis.
Unilever, Heineken and Diageo are the largest holdings in the fund, all representing more than 7% each of the portfolio. Consumer staples is the largest sector weighting with 43.3% with a further 6% in consumer discretionary.
In contrast, information technology represents 9.6% of the fund.
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Lindsell Train behaves as expected during Covid-19
Nevertheless, Curtis highlighted that Lindsell Train Global Equity had behaved as expected during the Covid-19 crisis given its best periods of performance have usually been when markets have fallen.
In the first half of 2020, the fund returned 3.3% compared to the 1% return in the MSCI benchmark, according to the June factsheet. However, it underperformed in Q2, as markets rebounded from their lows at the end of March, delivering 16% compared to 19.8% in the benchmark.
Curtis also noted the fund is underweight in the US, which represents 31.7%, while the UK, a much smaller weighting in the benchmark, represents 34% of the fund.
He said the US underweight made the fund’s track record since launch in March 2011 all the more impressive, delivering 321.36% compared to 157.5% in the FTSE World.
“This is an impressive feat given the managers only invest around half as much as the global stock market average in the US, which has been one of the strongest markets for several years,” he said, attributing the performance to stock picking.
In May, Lindsell Train quietly announced it was launching a North American fund for James Bullock, who is a co-manager on Lindsell Train Global Equity, alongside Nick Train (pictured) and Michael Lindsell.
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‘Market trends don’t continue forever’
Curtis said the Lindsell Train Global Equity fund was a good way to diversify into overseas markets, including “often overlooked” Japan to which it has a 22% weighting. It could work alongside a high risk emerging markets fund, he said.
Nevertheless, the note finished with a more cautious tone.
Curtis said: “Investors should note this fund’s quality-growth-style of investing has been in favour for some time, which has helped contribute to its impressive performance.
“Market trends don’t continue forever though, and investors should ensure they have style diversification in their portfolios, and regularly review investments to make sure they continue to meet their needs and objectives.”
The Lindsell Train Global Equity fund used to feature on the former Wealth 50 list but Hargreaves Lansdown removed it in the aftermath of the Woodford Equity Income fund suspension over concerns the fund house’s large stake in the D2C platform represented a conflict of interest.
Lindsell Train loaded up on Hargreaves Lansdown shares in April, during the coronavirus lockdown, taking its total stake to 13%.
See also: Nick Train defends Hargreaves Lansdown as pessimists play up Vanguard threat
