Here’s a shocking truth: despite five consecutive years of underperforming the UK stock market, Nick Train, one of the UK’s most prominent fund managers, has just survived a critical continuation vote for his investment trust, Finsbury Growth & Income (LSE:FGT). But here’s where it gets controversial—while 97.2% of voting shareholders backed him, Train himself abstained from voting, alongside his partner Michael Lindsell. Is this a sign of confidence or a strategic move? Let’s dive in.
Train, who has managed this century-old trust for 25 years, focuses on well-established growth companies—think big brands, strong intellectual property, and loyal customer bases. These are the high-quality growth stocks he’s known for targeting. Yet, his recent performance tells a different story. Over the past five years, Train’s trust has returned just 6.4% in share price total return terms, compared to a staggering 60.4% for the Association of Investment Companies (AIC) UK Equity Income sector. And this is the part most people miss—even his 10-year track record has taken a hit, with Finsbury Growth & Income returning 83.6% versus 126.2% for the sector.
In a candid interview last February, Train admitted that some of his once-star holdings, like Diageo (LSE:DGE), have become “subsequent disappointments.” His portfolio is concentrated, with just 20 to 25 stocks, and the top 10 positions make up a whopping 86.7% of the portfolio. This means performance hinges heavily on a few key players, such as Sage Group (LSE:SGE), Experian (LSE:EXPN), and London Stock Exchange Group (LSE:LSEG), which together account for a third of the trust. Diageo, his sixth-largest holding, makes up 8.9%.
Train is a classic buy-and-hold investor, but he’s been unusually active lately, adding new holdings like Auto Trader Group (LSE:AUTO), Games Workshop Group (LSE:GAW), Intertek Group (LSE:ITRK), and Clarkson (LSE:CKN). Over his 25-year tenure, he’s outpaced the market significantly, delivering a 706.4% share price total return compared to 328.3% for the FTSE All-Share Index. Yet, the recent underperformance has raised eyebrows.
The continuation vote was a make-or-break moment for Train’s high-conviction, quality-first strategy. If it had failed, the trust’s board could have replaced him. But shareholders overwhelmingly supported him, perhaps recognizing his long-term track record or believing in his approach. Here’s a thought-provoking question: Should investors prioritize short-term performance or trust in a proven long-term strategy?
Continuation votes are unique to investment trusts, setting them apart from funds. They give shareholders a direct say in the trust’s future, and in extreme cases, disgruntled shareholders holding just 10% of the share capital can trigger one. Notable examples of trusts that failed such votes include Schroders Capital Global Innov Trust (LSE:INOV) and JPMorgan Global Core Real Assets (LSE:JARA), both due to poor performance.
Unlike funds, investment trusts also have independent boards that oversee fund managers, hold them accountable, and protect shareholder interests. As a shareholder, you have real voting power—a stark contrast to funds, where your only recourse is often to withdraw your investment.
So, what do you think? Did shareholders make the right call by backing Train, or is his recent underperformance a red flag? Let us know in the comments below!
