Lindsell Train Global Equity: Worth Your Investment?

Lindsell Train Global Equity is a popular investment fund that has attracted capital due to its strong performance. The fund was founded by Michael Lindsell and Nick Train, who both have over three decades of investment experience. Lindsell Train's investment philosophy focuses on investing in 'exceptional' companies for the long term, with an emphasis on survivability, strong brands, and enduring competitive advantages. Their approach has delivered strong returns, outperforming its benchmark, the MSCI World Index. However, the fund has faced challenges recently, with its performance lagging behind sector averages in the past five years. This underperformance has been attributed to its concentration in certain sectors, limited diversification, and misalignment with market trends. Despite these setbacks, Lindsell Train continues to advocate for its long-term investment strategy, and investors must decide whether to maintain confidence in their approach or reconsider their investment decisions.

Lindsell Train Global Equity's performance

Lindsell Train Global Equity is an extremely popular investment fund that has drawn in capital thanks to its strong performance. The fund was launched on 16 March 2011 and is managed by co-founders Michael Lindsell and Nick Train, alongside James Bullock. It has a distinct investment philosophy, focusing on long-term capital preservation and growth, with a four-point belief system:

• Investors undervalue durable, cash-generative business franchises
• Concentration can reduce risk
• Transaction costs are a "tax" on returns
• Dividends matter even more than you think

The fund has a heavy concentration in the consumer defensive and financial services sectors, with a portfolio of 20 to 35 stocks from just four developed countries: the US, UK, Japan and the Netherlands. This limited diversification has been a key factor in the fund's underperformance over the past five years, as it struggled to keep pace with the higher-growth areas of technology and healthcare. The fund's strategy, which favours well-established, defensive companies, did not align with market trends during this period. As a result, the fund delivered a five-year return of 16.20%, far below the IA Global sector average of 54.27%.

However, over a ten-year period, the fund has been a top-decile performer, with a total return of close to 300%, outperforming its benchmark and peer group by a wide margin. This highlights the benefits of long-term investing. While the fund has experienced a period of underperformance recently, it has started to bounce back with top-quartile performance over one and three months.

Experts attribute the choppy performance to the fund's growth investment style suffering as market leadership has rotated towards value stocks. The fund's defensive nature and long-term investment approach are seen as potential advantages, but investors are warned that the period of underperformance could continue as interest rates rise and companies grapple with high costs and slowing economic growth.

The fund's popularity

Lindsell Train Global Equity is an extremely popular investment fund that has drawn in capital thanks to its strong performance. In 2024, Lindsell Train funds had over £12.5 billion invested in their global and UK equity portfolios. Their flagship fund, Lindsell Train Global Equity B Dis GBP, has funds under management in excess of £4.1 billion.

Lindsell Train Global Equity is a top-decile performer over 10 years with a total return of close to 300%, above its average IA Global peer and MSCI World benchmark by a wide margin. However, the fund has struggled more recently, sitting in the sector's bottom decile on a three-year view and posting a third-quartile loss of 8.5% over the past 12 months.

Despite this, Lindsell Train Global Equity has bounced back over the very short term, with the fund in the top quartile over one and three months. The fund's popularity is also driven by its transparent investment strategy, strong investment team, and low portfolio turnover, which reduces transaction costs.

Lindsell Train Global Equity's distinct investment philosophy focuses on investing in companies with strong and well-established brands, preferably with valuable and unique intellectual property and strong balance sheets. This strategy has delivered strong returns over the long term, with longer-term investors in the fund seeing extremely competitive returns.

The fund's investment strategy

Lindsell Train Global Equity is an investment fund that aims to achieve long-term capital and income growth by investing in a concentrated portfolio of global equities. The fund was launched in March 2011 and is managed by co-founders Michael Lindsell and Nick Train, along with James Bullock, who joined in 2010 and was promoted to Portfolio Manager in 2015.

• Investors undervalue durable, cash-generative business franchises
• Concentration can reduce risk
• Transaction costs are a "tax" on returns
• Dividends matter even more than you think

Lindsell Train takes a long-term approach to investing, focusing on companies with strong, enduring competitive advantages and well-established, defensive brands that have been around for decades, or preferably centuries. They invest in businesses with valuable and unique intellectual property, primarily in the following sectors: Consumer Branded Goods, Internet/Media/Software, Pharmaceuticals, and Financials.

The fund tends to hold between 20 to 35 stocks at any given time, which is a highly concentrated portfolio compared to other global equity funds. This strategy allows for higher conviction in select companies but also amplifies risk. The portfolio is further concentrated in just four Developed World countries: the US, UK, Japan, and the Netherlands.

Lindsell Train's approach to investing is transparent and disciplined. They prioritise capital preservation and see outperforming an equity index as less important than capital growth. They also have a long-term focus on survivability, taking into account environmental, social, and governance factors in their initial assessments and ongoing monitoring of investments.

The fund has delivered strong performance over the past decade, outperforming its peers and achieving solid returns. However, it has faced challenges in recent years, underperforming compared to its sector averages. This underperformance has been attributed to its heavy concentration in the consumer defensive and financial services sectors, limited diversification, and a strategy that favours established companies over high-growth areas like technology and healthcare.

Despite recent setbacks, Lindsell Train continues to advocate for its long-term investment strategy, and investors must decide whether to maintain confidence in this approach or reconsider their investment choices.

The fund's investment sectors

Lindsell Train Global Equity Fund is an extremely popular investment fund that has attracted capital through its strong performance. The fund was launched on 16 March 2011 and is managed by Michael Lindsell, Nick Train, and James Bullock. The fund's primary objective is to protect the real value of its clients' capital over the long term, with a focus on investing in "exceptional" companies.

The fund's investment strategy is based on four key beliefs:

• Investors undervalue durable, cash-generative business franchises.
• Concentration can reduce risk.
• Transaction costs are a "tax" on returns.
• Dividends matter even more than you think.

Lindsell Train tends to invest in companies with strong and well-established brands, preferably with valuable and unique intellectual property, and strong balance sheets. They favour well-established, defensive companies and have a heavy concentration in the consumer defensive and financial services sectors. The fund's portfolio is concentrated in just four developed countries: the US, UK, Japan, and the Netherlands.

The fund's performance has been mixed. While it has delivered strong long-term returns, it has underperformed in recent years, particularly in 2024, due to its limited diversification and focus on defensive sectors, which have struggled to keep pace with high-growth areas like technology and healthcare.

In summary, Lindsell Train Global Equity Fund offers a distinct investment approach, focusing on long-term capital preservation and investing in durable companies with strong brands. However, its performance has been choppy, and its defensive strategy may not suit all investors, especially those seeking higher growth opportunities.

The fund's founders and managers

Lindsell Train Global Equity is an investment fund co-founded by Michael Lindsell and Nick Train, who are also the fund's investment advisers. Lindsell has an undergraduate degree in Zoology from Bristol University, and Train has an undergraduate degree in Modern History from Oxford University. Both previously worked for fund management company GT Asset Management, which was bought by Invesco in 1998. Following the acquisition, Lindsell became head of the combined global product team, while Train resigned and took up a role as head of Global Equities at M&G Investment Management. They co-founded Lindsell Train in 2000.

The third portfolio manager running this fund is James Bullock, who has a Masters degree in Physics from Oxford University and a doctorate in Biomechanics from Cambridge University. He joined Lindsell Train in October 2010 and was promoted to Portfolio Manager in April 2015.

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