By Jessica Tasman-Jones, 14 Dec 21
The Lindsell Train Investment Trust has bagged its managers £14.5m in performance fees over a decade by comparing the stellar performance of its equities portfolio to a benchmark linked to UK government bonds, analysis by Portfolio Adviser reveals.
LTIT’s interim results this month revealed the investment trust could fail to earn any performance fees in 2022 following its adoption of the more appropriate MSCI World index as its benchmark this year. In the six-month period to the end of September, LTIT’s shares rose 5.6% and its net asset value was up 5.9%, while the MSCI World returned 10.2%.
Chairman Julian Cazalet announced over the summer that the strategy would be dropping its controversial benchmark, the “annual average running yield on the longest-dated UK government fixed rate bond (UK Treasury 1.625% 2071), calculated using weekly data, plus a premium of 0.5%, subject to a minimum yield of 4.0%”.
As such, all eyes are on how Nick Train’s portfolio will now perform on a relative basis and how this will affect performance fees, which are based on whichever of LTIT’s share price or NAV has the lowest value and are calculated at 10% of the differential with the benchmark.
‘The measure of success should be fair’
“For any investment trust that has a performance fee, the measure of success should be fair,” says AJ Bell head of active portfolios Ryan Hughes. “I think people would be hard pressed to say that for the last 10 years, charging a performance fee against that benchmark was a fair representation of what the trust was trying to achieve.”
QuotedData head of investment companies James Carthew agrees. “It is important to set a performance benchmark that has a similar risk and return profile to that of the portfolio.”
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