Thursday 10 December 2015

Finsbury Growth & Income Trust - Final Results

This trust is not the highest yielder but is the top UK Income Trust in terms of net asset value and share price performance over five and ten years, its returns far outstripping those of the FTSE All-Share index. A sum of £1,000 invested 10 yrs ago would now be worth £2,898 compared to a total return of £1,723 from the benchmark FTSE All Share index.

At around 2.2%, its yield is one of the lowest in the sector but its aim is capital appreciation and income combined, with a total return in excess of the FTSE All-Share. However, the trust's portfolio is constructed without reference to a stock market index.

Long standing manager Nick Train’s approach is based on that of Warren Buffett’s and involves building a concentrated portfolio of “quality” companies that have strong brands and/or powerful market franchises.

The characteristics that define a quality company for Lindsell Train are:

  • durability – companies that can prosper through business cycles for many years to come;
  • high return on equity – companies with the ability to grow earnings year-in, year-out are favoured over those with rapid short term growth, but uncertain long term prospects; and
  • low capital intensity/high free cash flow generation – companies that do not have to make heavy balance sheet investment to generate earnings growth.

He holds shares for the long term regardless of short-term volatility, aiming for them to double or more in value over time. This results in extremely low portfolio turnover, which saves on transaction costs. These costs over the past year amount to just £736,000 or just 0.11% of net assets. The trust's total expense ratio remains reasonable at around 0.8%.


The trust has today announced results for the full year to 30th Sept 2015 (link via Investegate). Share price total return is up 11.8% compared to -2.3% return for the FTSE All Share. A 14% outperformance in the current climate is quite an achievement.

Someone send for the police!! This year, the manager purchased a new holding for the portfolio - the first in the past 4 yrs! French drinks group Remy Cointreau has been added to the portfolio

Top five portfolio holdings are: Unilever 9.3%, Relx 8.8%, Diageo 8.4%, Heineken 6.5% and Hargreaves Lansdown 6.4%.

Over the past year the dividend has increased by a respectable 7.1% to 12.1p (2013 11.3p). Revenues were 13.5p (2014 12.6p) and therefore there is once again a small surplus after accounting for payments of dividends which will further bolster the dividend reserves.
3 yr chart FGT -v- FTSE All Share Index
(click image to enlarge)

Commenting on his portfolio, manager Nick Train said  "It was drilled into me many years ago that there should never be any slack or deadwood in an “active” investment portfolio. There should be a reason for every holding and a live, current justification for the disposition of every penny of the capital entrusted to you.

Your Company has a concentrated portfolio which we believe meets that test. Every holding is a business that meets our investment criteria. This is most simply summarised as – the business owns a brand or franchise that makes it more or less unique. We want to be convinced that it would be difficult for any competitor to replicate the assets of our investee companies; ideally at all, or failing that, not to be able to replicate them for anything like their current enterprise value. In addition, none of our holdings currently trades at a price which we regard as excessive – there is more or less upside to our valuation targets".

Over the past year I have been moving some of my investment proceeds into index funds but I think most investors will acknowledge there are always going to be a handful of managers who can consistently beat the index and it seems to me Nick Train is certainly one of them. You cannot argue with the consistent returns he has provided for shareholders over many years.

Train has recently said his ambition is to make the trust into a FTSE 100 company over the next 10 years - ambitious but good to know he is likely to be in charge over the longer term.

I am very happy to continue holding and would be very pleased to see the trust quadruple from here.


  1. As always, the key is the research to identify those Active Managers who are not closet Index Huggers and who will actually beat the market due to superior stock selection. Never EASY, but always worth the effort when it works. Whilst I do agree all the research points to using trackers and ensuring the right asset/sector allocation (this is never as simple as it is made out to be by most of the research sites according to all the more in depth research I have done on this subject) and for most people who don't want to do the necessary legwork/take the risk on Active Managers, the right route is the Trackers, but for those of who do want to put in all the time and effort to find the best of the Active Managers, it can be worth the while and Nick train is one of those

    1. Gareth,

      Well said, although even when you do the research and 'legwork', there are no guarantees the active manager will outperform as I have seen with Murray Intl. this past couple of years. As you say, these decisions relating to selection of actively managed funds and trusts are never straight forward so its always likely to be a calculated gamble. Maybe a lower level of risk with the likes of Train, Barnett and Woodford?

  2. Thanks for this update - still on my list to buy, although as you say the yield is low but I think definitely worth having in any portfolio. Am likely to take a punt sometime next year.

    1. weenie,

      Thanks for dropping by - yes, the yield is quite low but mainly because the share price has risen so strongly over recent years. If the price was near to the level when I first purchased, the yield would be over 4% but I am very happy with a 50% increase in capital values and will 'make do' with my lower yield.

      As you may know, the management operate a price control mechanism which keeps the share price close to the NAV so its never likely to at much of a discount. Good luck with your intended purchase.