Lindsell Train Global Equity D GBP Inc |
Morningstar's Take
|13/07/2023by Jonathan Miller
| Lindsell Train Global Equity’s distinct investment philosophy is implemented in a disciplined fashion. The narrow market leadership, which is mainly outside of the area they invest in, is a major part of their recent underperformance. Lindsell Train co-founders Michael Lindsell and Nick Train apply their investment approach to a global opportunity set. Both have more than 30 years' experience, including several years managing global equity portfolios prior to launching this strategy in 2011. They are joined by comanager James Bullock; while less experienced, he has been contributing to the portfolio since joining Lindsell Train in 2010. The investment philosophy lies in the belief that a highly concentrated portfolio of high-quality, cash-generative, strong, and easily understood business franchises will outperform the market and reduce volatility over the long term. The managers use strict criteria aligned to this belief to significantly pare down the universe. Qualifying stocks are subject to in-depth fundamental analysis by the managers and four supporting analysts. Given the restricted investible universe and the managers' long experience, we find the team sufficiently resourced. We believe a key strength lies in Lindsell and Train's deep understanding of company strategies and their ability to see through the noise and buy stocks that are best placed to defend their business over the long term. The highly concentrated, stock-specific, and unconstrained approach has resulted in sizeable regional and sector deviations from the MSCI World Growth Index. This includes a low technology weighting given the managers feel these relatively newer businesses can significantly change their strategies as they develop. Rather, they prefer firms with a long and consistent heritage that have a high likelihood that management will continue to execute on a similar path. The managers' unwavering adherence to their investment process has resulted in long-term success. However, more recent performance has been challenged. Even though there was strong outperformance in 2022, the extremities of mega-cap tech doing so well on either side of that year, meaning underperformance versus the category index is wide over three years to end of June 2023. The fund barely fishes in the technology stalwart pond, meaning the fund’s return profile can deviate meaningfully from the index and its Morningstar EAA Fund Global Large-Cap Growth Equity peers. After years of significant net inflows, the strategy has begun to experience net outflows. Assets (including segregated mandates) stood at around GBP 10.6 billion at the end of May 2023. This helps alleviate some capacity worries, though we note that, despite this, high ownership stakes mean that some positions can no longer be added to. The managers’ ability to execute the process and their approach to competition for capital in the fund still require monitoring. |
A very long-term mindset.To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | Above Average |
| Parent | Below Average |
| Process | Above Average |
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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