Finsbury Growth & Income: June 2025 trust update

• Manager Nick Train has over four decades of investment experience and is well known for his buy and hold investment approach

• Train runs a highly concentrated portfolio of high-quality UK businesses with a long-term focus

• The trust has delivered impressive returns over the long term but has underperformed the UK stock market over the past four years

How it fits in a portfolio

Finsbury Growth & Income Trust aims to grow both capital and income over the long term by investing in a relatively small number of high-quality UK companies. Most of the trust is made up of large well-established companies that have strong brands or powerful market franchises.

It could help diversify the UK portion of a portfolio focused on smaller companies or add exposure to UK companies to a portfolio investing overseas. When investing in closed-ended funds, investors should be aware the trust can trade at a discount or premium to net asset value (NAV). The income goal of this trust is to grow dividends steadily over time, rather than trying to provide the highest yield today.

Manager

The trust is managed by Nick Train, who co-founded Lindsell Train Limited in 2000. He has over 40 years’ experience in investment management and during that time has established a unique investment approach. Before founding Lindsell Train, he was Head of Global Equities at M&G Investment Management, where he joined as a director in 1998. Prior to that, Train spent 17 years at GT Management, managing their income fund for 13 years and his final role was as Chief Investment Officer for Pan-Europe.

In addition to managing this trust, Train manages the Lindsell Train UK Equity fund with the support of deputy fund manager Madeline Wright as well as the Lindsell Train Investment Trust. He also co-manages the Lindsell Train Global Equity fund with Michael Lindsell and James Bullock. Given the significant degree of overlap across these portfolios’ holdings and the fact that they all use a similar investment process, we believe that Train can dedicate enough time to each.

Process

Train seeks out a small number of high-quality UK companies that he believes can deliver good long-term total returns – growth in both capital and income. He defines a quality company as being durable, with the ability to grow earnings and generate a high level of cash in different economic environments to deliver attractive returns to investors. The trust’s objective is to deliver a growing income over time as Train believes the consistency of long-term dividend growth is more important than a high but potentially unreliable yield. He’s therefore willing to accept lower yields if he believes dividends can carry on growing over the long run, though of course this isn’t guaranteed.

Train invests in companies for the long term and once invested, lets the power of compound growth get to work. Investing in a relatively small number of companies means each holding can have a meaningful impact on overall returns, but it’s also higher risk.

The trust was invested in 23 holdings at the end of its financial year in September 2024 with the top 10 holdings making up 90.5% of the portfolio. The top three holdings, Experian, London Stock Exchange and RELX, were all sizeable individual positions at 13.5%, 13.0% and 12.3% respectively.

The trust’s portfolio has evolved over recent years from a portfolio dominated by consumer brands to one that is more focused on digital businesses able to thrive at scale. Consumer brands still represent a significant part of the portfolio at 29% of the trust’s assets, but this is down from 49% six years earlier. Over that same time period, digital businesses have gone from accounting for 40% of the trust’s assets to 62%.

The trust has also become more UK orientated as a result of Train’s view that the UK stock market is very attractively valued compared to international peers. The trust is now invested solely in UK listed businesses, down from 18% in 2019.

The trust uses gearing (borrowing to invest), which can improve gains but also magnify losses in a falling market and therefore increases risk. At the end of the trust's last financial year in September 2024, gearing stood at 0.7%, however their limit is 25%. They also have the flexibility to use derivatives, which if used, adds risk.

Culture

Nick Train is a founder and one of the major owners of the Lindsell Train business. We view this positively as ownership of the business aligns his long-term incentives with the interests of investors. The distinct investment philosophy that he and Michael Lindsell have created runs strongly through all their funds and trusts, and the entire business is geared towards running the portfolios the ‘Lindsell Train way’.

The duo and their team spend a lot of their time reading, learning and compiling information on companies they own shares in and those on their watchlist. They have tended not to recruit experienced people, preferring to train and develop graduates who can be moulded into the Lindsell Train way of thinking.

ESG Integration

All Lindsell Train funds seek to invest in exceptional companies for the long term. These companies tend to be well-managed with responsible business practices. Lindsell Train fund managers avoid capital intensive industries (such as energy, commodities and mining companies) and those judged to be sufficiently detrimental to society that they might be vulnerable to burdensome regulation or litigation (such as tobacco, gambling and arms manufacturers).

Fund managers are responsible for voting and engagement. Their long-term approach means they are generally supportive of company management teams. If the fund managers disagree with the management team’s approach, they will try to influence the company to adopt a different course of action if it’s in clients’ interests. Voting and engagement case studies are available in the firm’s annual Stewardship Report and its ESG & Engagement Report. The firm’s full voting history is available in PDF format on its website, although no rationales are provided.

Cost

The trust’s annual ongoing charge to the end of September 2024 was 0.61%. Investors should refer to the latest annual reports and accounts and Key Information Document for details of the risks and charging structure.

If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 p.a. for a SIPP and £45 for an ISA) per annum also applies. Our platform fee doesn't apply if held in a Fund and Share Account or a Junior ISA. As investment trusts trade like shares, both a buy and sell instruction will be subject to our share dealing charges within any HL account except online deals in a Junior ISA.

Part of the trust’s annual charge is taken from capital, which can increase the yield but reduces the potential for capital growth.

Performance

Since Train took over the trust in December 2000, he’s delivered strong long-term returns. Over this period, the trust has generated returns of 746.93%*, compared with 267.77% for the FTSE All-Share index. Remember past performance is not a guide to future returns. Investments fall as well as rise in value, so you could get back less than you invest.

Over the trust’s last financial year to the end of September 2024, it delivered a share price return of 3.4%, with the trust’s net asset value (NAV) rising by 8.2%. A widening of the discount the trust traded on over the period explains why the share price return lagged the NAV return. Over this period, the FTSE All Share index rose by 13.4%.

Among the main detractors over the year were luxury fashion company Burberry and consumer good business Diageo. Some companies in the trust have performed well over the year though. One of the best performers was data and technology business Experian, and information-based analytics and decision tools provider RELX.

In the trust’s last financial year to the end of September 2024, total dividends paid to shareholders amounted to 19.6p per share. This is a 3.2% increase on the previous year.

The trust currently trades at a discount of 7.62 % and has a dividend yield of 2.15%, although yields are not guaranteed and therefore are not a reliable indicator of future income.