It has been another challenging period for veteran manager Nick Train, with the Finsbury Growth and Income trust down by 7.4% in net assert value (NAV) and 7.8% in share price terms.
Over standard time frames (one, three, five and 10 years), the trust is among the worst-performing strategies in the IT UK Equity Income sector, according to FE fundinfo.
“We acknowledge the strategy has not been working for too long a time,” he conceded. “However, we believe that dismantling the portfolio and selling out of companies of the calibre we own at this juncture would not be in the best interest of investors.”
He clarified his portfolios have been based on three industry preferences: Data companies, consumer brands and stockmarket proxies/asset management companies. These tend to share characteristics, such as sticky revenues, low capital intensity, and secular growth trends.
While he argued clients benefitted from this over the long term, he felt “obliged” to defend performance after “another bruising period for your company”.
At the start of 2025, the trust held three investments in asset managers: Hargreaves Lansdown, Schroders and Rathbones, with the former two having now been taken over.
See also: Nuveen’s £10bn acquisition of Schroders is a ‘structural shift for the industry’
“We are open-minded, currently, about what to do with the just under 8% of the portfolio held in Schroders, although the positive return it offers if held through to the completion of its takeover is certainly attractive in today’s stressed market conditions,” Train said.
While he remained generally positive on the opportunity set for Rathbones and for private wealth advice as a segment of the UK asset management industry, the Schroders takeover was a wake-up call.
“Schroders’ acceptance of a bid from a US peer, despite owning the best private wealth brand in the UK in Cazenove, forces us to acknowledge that, even for the best franchises, the glory days of generalist active investment management are, at least temporarily, over.”
For this reason, he described it as “unlikely” that the capital from Schroders will be recycled into another UK wealth manager.
On the consumer brands front, Train acknowledged Diageo and Burberry have been “painful” over the past three years and have “understandably tested investors’ patience”.
“Nonetheless, we still believe the Burberry brand and the best of Diageo’s brands retain their global relevance and will resume their long-term growth trajectories once consumer confidence improves.”
In 2000, spirits represented 26% of the US alcoholic beverage market, rising to 37% in 2025 at the expense of beer, according to recent Bernstein research.
“That multi-decade shift in consumer preference, away from higher calorie, less differentiated beer, to premium spirits looks set to continue.”
This will be a tailwind for some of their brands, such as Fever-Tree and Diageo, the Finsbury manager argued.
“Investors must decide whether we are right to retain our consumer brands, as we intend to do, confident in the enduring investment appeal of their core brands and through a period of industry consolidation.”
See also: Finsbury holds faith in Diageo and Fever-Tree despite drops
Finally, he defended his position in data companies and his “controversial” view the UK has world-class businesses that will benefit from AI’s wealth-creating impact.
“I say controversial, because the UK stockmarket is not commonly looked to as a source of tech-advantaged companies.” He conceded this view has been increasingly challenged so far this year, with businesses such as Experian, LSEG, RELX and Sage all down in share price terms year-to-date.
See also: FTSE 100 continues surge into record territory as US markets face another AI wobble
However, “constantly replenishing, proprietary business data at scale, is right at the heart of the competitive advantages of the companies we have chosen to invest in”.
Businesses such as Experian update their data a billion times a month, RELX handles 450 million identity checks a day, while Sage is training their own in-house AI models, he explained.
“[Investors must] decide whether our contention is correct that the sell-off in UK-listed data owners is offering an extraordinary opportunity to access growth companies at the wrong price, as we believe.”
