At least 96% of Finsbury Growth & Income (FGT) shareholders have voted for the 100-year-old investment trust to continue, chairman Pars Purewal declared this afternoon.

While the result – based on votes of 34% of the company’s shares – represents a clear vindication of the board’s decision to support fund manager Nick Train through five years of underperformance, it leaves the non-executive directors overseeing Train’s contract with a challenge of how much longer to give him?

Around 200 shareholders packed the Guildhall in the City of London to hear Purewal summarise the board’s response to the “challenging” downturn that has seen the former top performer slump to the bottom of its UK Equity Income sector with a total return to shareholders of just 6.4% over five years.

The board had instituted the company’s first continuation vote in order to give shareholders a voice, cut fees to the fund manager by £600,000 and taken “decisive action” on capital allocation, the chair said. That was a reference to the estimated £817m of shares the company has bought back since late 2023 to ensure the stock did not fall to a steep discount to net asset value (NAV).

While good practice for a company that issued hundreds of millions in shares in its its good times, it infuriated some shareholders who thought it had needlessly shrunk Finsbury Growth to under £1bn. One other investor said, however, it had kept the fund out of the clutches of activist Saba Capital which has been terrorising the boards of other underperforming trusts.

Let Train speak!

Although ultimately supportive, the audience of investors was in a rebellious mood demanding to hear Train speak before casting their vote on continuation and the other resolutions on the agenda. The results from these votes were published after the market close showing the level of support for continuation had in fact been 97%.

When called to speak earlier than scheduled, Train was in no mood to celebrate the 25 years he and his firm Lindsell Train have run Finsbury Growth & Income on behalf of 25,000 shareholders.

Having looked forward to the anniversary two years ago, the fund manager was mortified to report “last year as my worse relative performance in my 40-year career”. A 7.6% drop in asset value meant Finsbury Growth trailed the FTSE All-Share’s 24% total return by a huge margin of 31.6%.

Loyal long-term shareholders can take comfort from Morningstar data showing that since Lindsell Train’s appointment in December 2000 the trust has returned an annualised 8.7%, ahead of the All-Share’s 6%. Over 15 years to 31 December, shareholders received an average 8.9% a year, beating the 7.6% of the index.

“Star” under pressure

The figures reflect how Train was a “star” fund manager for his first two decades in charge but has seen that status questioned as his concentrated portfolio of global brands, such as Diageo, Unilever and London Stock Exchange Group, and digital winners, including RELX, Experian and Sage, has lagged the benchmark since 2021. The company’s figures also show the trust underperforms the All-Share over one, three, five and ten years.

After the meeting Finsbury Growth announced it had appointed Mary Beth (MB) Christie as a new non-executive director. Christie, a data expert who is also a non-exec at Moneysupermarket operator MONY Group (MONY), would help the board better understand its digital investments, Purewal said.

Train, who has built a 4.9% stake in the trust currently worth £47.8m, did not take part in the vote to avoid a conflict of interest. In his presentation he reiterated his conviction in the growth prospects of his companies, saying it was his ambition “to deliver a new multi-year leg of strong investment performance, derived from the same investment approach”.

However, Train accepted that he was in a performance-related industry and had to deliver good returns if he was to retain the honour of being a “steward” of many investors’ money.

Asked by this correspondent after the meeting how long he wanted to continue as fund manager, if the board maintained his appointment, Train, 66, replied all his investment heroes, such as Berkshire Hathaway’s Warren Buffett had “gone on and on”.

Train said “intellectual curiosity” also motivated him as he wanted to see if the likes of Diageo and LSEG could fulfil his expectations despite their stock market travails. He was encouraged by Diageo’s new boss Dave Lewis, with an “exemplary record” at Tesco, who said that the Guinness to spirits group owned “world class businesses and brands”. LSEG’s partnership with ChatGTP operator OpenAI last month gave its valuable data another important distribution channel, Train said.

There was also good news for Train from Schroders (SDR), a top 10 holding, which rallied 8% to a two-year high after a trading statement predicted the fund manager’s 2025 profits would come in around 15% above expectations.

Seven more years?

Train and co-founder Michael Lindsell are in the habit of giving the board of Lindsell Train (LTI) investment trust, which invests in their fund management firm, an annual commitment at the start of each year to work for another seven years. If they do that again this year that gives Train to at least 2033 to achieve his aspiration of turning round performance and re-rating shares currently trading 6% below asset value.

A revival in Finsbury Growth would not only delight shareholders but relieve its board from the challenge of whether to call time on Train’s tenure. Purewal and his co-directors have consistently stuck to the line of endorsing their manager – and his deputy Madeline Wright – for their disciplined process, saying the underperformance has been caused by their “quality growth” style being out of fashion. If the poor returns continue they all may find it difficult to counter the criticism that Lindsell Train has somehow not adapted to changing market conditions.

Purewal, a former partner at auditor PwC who also serves on the board of Law Debenture (LWDB), told QuotedData that the board would make a “measured” response to the vote and the impressive scale of shareholder support. That’s a sign that while Lindsell Train will retain its mandate for now, like Train and the trust’s shareholders, the directors will not be satisfied until Finsbury Growth returns to its winning ways.