Nick Train: LSE and financial holdings hit Finsbury returns

Nick-Train-Lindsell-Train-500x320.jpgNick Train says that Finsbury Growth and Income trust’s holdings in financials and its 7 per cent stake in the London Stock Exchange hit the investment trust’s returns last Friday.

The manager says that while “things are moving so quickly across markets” he puts the fund’s underperformance since the Brexit vote down to a handful of factors.

The share price of the Finsbury Growth and Income trust fell by 60 points to 539.50 at market open on Friday, before rebounding to close the day at 585. However, the trust has dropped a further 4.6 per cent today.

Specifically, Train says the trust’s position in LSE, which was exposed to a Brexit vote, has hurt the trust.

“LSE has traded absolutely as a Brexit chip, with significant upside if the politics allow its merger to proceed and some downside if not. No surprise that LSE had detracted from our performance in the run-up to the vote,” Train says.

LSE shares fell 8 per cent on Friday, after the result of the EU referendum, with its proposed merger with Deutsche Bourse thought to be at risk following the result. Train says the share price was supported by a joint statement from LSE and Deutsche Bourse reaffirming commitment to the merger.

Another hit to performance came from the Finsbury Growth and Income trust’s holdings in UK financials, including Hargreaves Lansdown and Schroders, which saw double-digit falls on Friday.

However, the current market volatility is providing buying opportunities, says Train. He says the portfolio has a “modest” amount of cash at the moment, all of which he plans to put to work in the coming week, “most likely in existing holdings”.

Train adds that while the future is uncertain, “we take an optimistic view”.

“We expect the UK to be able to reach an acceptable trade agreement with our friends on the continent, while at the same time increasing the number of other important economies with whom we will be able to trade more freely. This should be good for the UK economy and enhance the long run earnings power of our portfolio companies,” he adds.

“We urge all our clients to remember how critical the ‘long term’ is for the valuation of UK equities and not to obsess too much about short term earnings disruption.”