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Lindsell Train Investment Trust highlights three factors for second year of underperformance

Lindsell Train Investment Trust highlights three factors for second year of underperformance – Lindsell Train Investment Trust (LTI) has posted its annual results for the 12 months to 31 March 2022, during which time it suffered a second consecutive year of disappointing relative performance as compared to its recently introduced equity benchmark – the MSCI World index in Sterling.

The NAV total return was down 2.3%, while its share price total return was down by 20%. This compares with the benchmark’s rise of 15.4%. During the period, the trust’s premium of 20% fell to a discount of 0.8%.

The chair said the underperformance was attributable to the following three factors: firstly, the company has limited investments in the technology companies that have been at the vanguard of performance in global markets since 2019 and have contributed most to strong benchmark returns. Secondly, the manager’s investment approach specifically avoids companies in two other sectors that also contributed significantly to the strong performance of the benchmark index – energy and financials. The final factor was the lower valuation attributed to the company’s manager, Lindsell Train Limited (LTL) in which LTI owns a 24.3% stake.

Recently, LTL’s funds under management have fallen, largely as a result of net redemptions but also because of the decline in the value of investments held in client portfolios.

The Board recommends paying a dividend for the year to 31 March 2022 of £53.00 per share, up 6% from last year and reflecting the small increase in LTIT’s net profits. This is made up of an ordinary dividend of £51.12 and special dividend of £1.88 in respect of the proportion of LTL’s income that was earned from performance fees.

Last year 85% of LTI’s total revenues were accounted for by dividends paid by LTL. The board said falling LTL FUM could in future affect the company’s profitability and its dividend. Although the board has sanctioned paying a maintained dividend out of revenue reserves in the past, consideration may need to be given to reducing the dividend in future years should circumstances so dictate.

Statement from the chair:

Viewed objectively the outlook for the Company’s investments could not be more uncertain. The war in Ukraine, the pandemic, supply chain issues and the associated logistical challenges, the rise in commodity prices, inflation and rising interest rates all spring to mind as material risks to the value of equities. We have no special insight on any of these risks except to reflect that their combined impact is impossible for anyone to predict! We endorse our Manager’s approach to mitigating these risks – and indeed any others yet to materialise – which is to invest in a concentrated portfolio of treasured and durable business franchises trusting that the unique market positions they have carved out for themselves allow them to survive and prosper through all eventualities.

LTI : Lindsell Train Investment Trust highlights three factors for second year of underperformance

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