Another decent year for Nick Train’s Finsbury Growth & Income Trust

The Finsbury Growth & Income investment trust (LON:FGT) has an excellent long-term track record and despite losing money in 2020 has significantly outperformed its benchmark.

In its final results for the year to 30 September the £1.9bn UK investment trust reported a loss of 7.7%, which was a creditable achievement given that the FTSE All-Share index was down 16.6% over the same period. 

Manager Nick Train has a unique investment process that involves building a concentrated portfolio of quality companies that have strong brands and/or powerful market franchises. The resulting fund looks very different to its benchmark and has generated significant long-term outperformance. 

Over the last ten years the share price total return of 245% is more than three times bigger than the All-Share’s gain of 74%, which demonstrates just how much value an excellent active manager can add. 

A unique portfolio

At the end of September the portfolio consisted of just 25 holdings with the ten largest positions accounting for 82% of the assets. There is a heavy emphasis on trusted consumer goods through stocks such as Diageo, Heineken and Unilever that make up half of the fund, with a further 27% invested in financial services businesses such as the London Stock Exchange, Schroders and Hargreaves Lansdown.

Portfolio turnover for the year was very low at 1.3% as the manager believes that the best way to achieve significant returns is to invest in exceptional companies and selling or top-slicing “as rarely as possible.” Writing in the accounts Train said that they invest in a truly strategic way, which keeps the transaction costs low and maximises the chances that their investments turn out not just successful, but spectacularly so.

He goes on to point out that since 1988 Unilever’s share price is up 17 times, Diageo’s 16 times and the Daily Mail & General Trust, another of the fund’s holdings, eight times. Over the same period the FTSE All-Share has little more than trebled. 

Power to add

Train recently provided an interesting update in which he said that there are two types of business that they want to own more of, the first of which are UK companies with luxury, premium or aspirational brands. Luxury drinks maker Fever-Tree that was added to the portfolio earlier in the year comes in to this category, as does the fashion house Burberry, which has been retained despite its recent share price weakness.

The second category consists of substantive UK companies with credible and globally-competitive assets in technology, data and analytics. Examples of holdings in this area include the London Stock Exchange and RELX, as well as the new position in the credit reference agency Experian. 

Finsbury Growth & Income is the best performing UK equity income investment trust over the last ten years. The broker Numis rate it as one of their favoured UK Equity funds, despite the fact that its yield of 1.9% is well below what can be obtained elsewhere.