The Lindsell Train Investment Trust announced its annual results for the year end March 31 2023. The company’s net asset value per share fell 5% during the period, although the payment of the company’s total annual dividend of £53.00 per share in September 2022 ensured that the NAV total return was only fractionally down, by 0.4%. This was a marginally better result than the performance of the company’s benchmark, the MSCI World Index in Sterling, which fell in value by 1.0% over the year. The company’s share price closely tracked the NAV for most of the year finishing at a 0.4% discount.
After two consecutive years of underperformance compared with the benchmark index between 31 March 2020 and 31 March 2022 it was positive to see comparative returns improving, however shares still remain well below (around half) the peak reached prior to the pandemic.
The trust’s cornerstone investment is its holding in Lindsell Train Limited (LTL) – the asset management company – and this represented 40.3% of NAV at 31 March 2023. This position has held back overall performance in recent years even if in the year to 31 March 2023, the LTL valuation total return was marginally positive at 0.2%. From LTL’s peak valuation on 30 June 2021, LTL’s total return to 31 March 2023 was down by 14.0%. Over the last two years LTL has been defending its approach to investment in the face of disappointing investment performance across all its strategies. Relative performance was worst in 2021 and improved for some strategies in 2022 but cumulatively there is some ground to be made up.
The chairman says that, in the circumstances, and exacerbated by other factors unrelated to performance, it is perhaps not surprising that LTL’s funds under management (FUM) have fallen on account of net client withdrawals. FUM for LTL peaked in June 2021 at £24.6bn and had fallen to £18.6bn at 31 March 2023, after experiencing £5.3bn of net outflows. Lower FUM has resulted in LTL’s valuation falling by about 29.5% from its peak to 31 March 2023.
Commenting on the performance, chairman Julian Cazalet noted:
“The company’s long-term returns remain satisfactory even with rising inflation over the last two years and continue to meet the company’s investment objective. The annual NAV total return since inception was 13.3% and remained well ahead of annual RPI inflation of 3.5%. Over the last five years NAV annual total returns were 11.1% compared with a rise in the RPI of 5.7%, even though this captures the lower NAV returns and higher inflation of the last two years. The manager believes that the best way to mitigate rising inflation is to invest in companies whose market positions allow them to raise prices or innovate through the application of technology to grow and to offset cost pressures. We see some evidence of this from the strong corporate performances reported by the company’s quoted holdings after lockdowns ended.
“In the face of these challenging circumstances there is a reassuring consistency and thus no change to the manager’s overall approach to investment. Indeed the quoted portfolio is all but unchanged from this time last year. It is comprised of ten durable cash generative companies and two pooled funds, themselves made up of similar companies, generating in aggregate higher returns on capital than the average quoted company. The manager believes that by letting these great quoted businesses compound their returns from year to year rather than changing them in the hope of anticipating shorter-term market price fluctuations, which incurs execution risk and dealing expense, performance will generate lasting real returns for shareholders as has been the case for much of the company’s existence.”
LTI : Outperformance for Lindsell Train but still a long way back