Nick Train finds the suggestion there is a conflict of interest between his Finsbury Growth & Income trust and Hargreaves Lansdown “painful” and claims the relationship has been vetted by compliance and the regulator.
During the Finsbury Growth & Income AGM last Friday one retail shareholder asked Train whether there was a potential conflict between the £1.7bn trust and the £7.1bn D2C firm.
Hargreaves is Finsbury Growth & Income’s second largest shareholder, owning some 18.4 million shares in the investment company. It is also one of the trust’s largest investments, representing 7.3% of NAV, and makes up 6.9% of the £5.9bn Lindsell Train UK Equity fund.
Train’s investment boutique Lindsell Train is Hargreaves’ largest institutional shareholder with a 12% stake in the business, putting it just behind co-founder Peter Hargreaves who owns 24.3% of the company.
‘That’s not the way we do business’
Train told the investor the question is one he and Lindsell Train co-founder Michael Lindsell find “upsetting”.
“I don’t want to sound too aggressively defensive because it arouses suspicion,” he said.
“The implication of the question is that we would contemplate using our clients’ savings in order to foster a business relationship to the advantage of us at Lindsell Train.
“But that’s not the way that we operate and do business,” he continued. “We have found it painful that the question is even raised.”
Regulator looked into potential conflicts
Compliance teams at Train’s fund boutique Lindsell Train and Hargreaves Lansdown had reviewed the matter and found no issues, he said.
“And obviously the regulator looked at this as well,” he told shareholders at the AGM.
The FCA declined to comment.
Hargreaves Lansdown has been in hot water over its ties with another star manager Neil Woodford since the suspension of his multi-billion pound equity income fund last June, which affected 133,769 of its own customers.
Former FCA boss Andrew Bailey confirmed the City watchdog was looking into whether the D2c firm, which had championed Woodford Equity Income via its Wealth 50 list and multi-manager range, was too slow to react to the growing liquidity issues in the fund.
A month after the Woodford Equity Income suspension Hargreaves pulled two of Train’s open-ended funds – Lindsell Train UK Equity and Lindsell Train Global Equity – from its Wealth 50 list.
When Portfolio Adviser contacted Hargreaves for this story it said it does not comment on its interactions with the regulator.
Hargreaves remains ‘magnificent business’
Train said he and business partner Lindsell had recognised Hargreaves’ growth potential and “incredible economics” ever since buying shares in the business for £1.50 a pop in 2007 after it listed on the London Stock Exchange.
Shares in the D2C firm have slipped 16% to £15.19 in the last year from the reputational fallout from the Woodford saga, which Train had previously described as a “regrettable” turn of events for Hargreaves.
But during the AGM Train defended the platform group as “a magnificent business”.
“This is going to be one of the big winners for Finsbury,” he said. “And in a sense, I neither know nor care what Hargreaves shareholders do. I own it because we believe in that business model.”
