Lindsell Train trust delivers next to nothing compared to 16% gains in new benchmark

LTIT dropped its easy-to-beat gilts benchmark for the MSCI World this year


The Lindsell Train Investment Trust has delivered next to nothing over the eight-month period since it dropped its gilts benchmark in April and adopted the MSCI World.

Michael Lindsell (pictured) said in the period since 1 April, its net asset value has risen just 0.7%, while the MSCI World is up 16.1%. “These are disappointing returns for our shareholders in the short term when held up against the trust’s longer-term absolute and relative performance,” Lindsell said in the investment trust’s November update.

The £252m investment trust’s relative performance had previously been compared to the “annual average running yield on the longest-dated UK government fixed rate bond (UK Treasury 1.625% 2071), calculated using weekly data, plus a premium of 0.5%, subject to a minimum yield of 4.0%”. This was also the benchmark from which Lindsell Train was able to bag £14.5m in performance fees over a decade.

Lindsell blamed the recent underperformance on the 47% weighting in Lindsell Train Limited, which has seen funds under management fall after a year and a half of disappointing performance. “Should FUM at LTL continue to fall, this of course provides a difficult ongoing background,” he said. Although he noted the asset pays a dividend in December, which would provide some relief in next month’s update.

But not all the trust’s poor performance could be blamed on LTL with Lindsell noting the portfolio’s quoted holdings had struggled against a market led by technology and cyclical companies. “Frustratingly the trust’s sole ‘pure’ technology company, PayPal, that performed spectacularly in 2020 and early 2021, has faltered lately as some of the extraordinary demand for online payments in lockdown has begun to dissipate.”

Nevertheless, he said the Lindsell Train North American fund had become the investment trust’s second-largest holding, after LTL, thanks to its performance compared to the rest of the portfolio, and this offered indirect exposure to technology names. The fund is up 22% year to date and rose 23% in 2020 meaning it now accounts for 8.3% of the portfolio.

Additionally, Lindsell said he was encouraged by improved business performance in a number of quoted holdings

He said: “Diageo has noted the welcome reopening of bars and clubs, adding to the continued strong demand for premium spirits at home; AG Barr upgraded its expected sales and profits for the full year; Nintendo reported strong recent sales of its Switch console and of its newly released Pokémon games; and RELX continues to grow its business around its data, legal and scientific content assets.”

During the month, the team added to its holding in Laurent-Perrier, taking it to just over 1% of NAV.

See also: Lindsell Train bagged £14.5m of performance fees with gilt benchmark