Nick Train’s investment trust pledges to do ‘whatever it takes’ to boost returns
Finsbury Growth & Income has pledged to do ‘whatever it takes’ to boost returns for shareholders after a period of weak performance.
The investment trust, led by stockpicker Nick Train, has seen returns languish in recent years after his buy-and-hold investment thesis fell apart.
What started as difficulties in his consumer holdings moved into software stocks, which have been affected by fears of competition from artificial intelligence companies.
FGIT’s NAV per share total return plummeted from 2.1 per cent to minus 14 per cent in the six months to the end of March.
Its share price total return fell to minus 13.2 per cent, from 4.2 per cent a year ago.
Train, who was endorsed by investors at a continuation vote in January, said the trust had been hit hardest by a software sell-off earlier this year.
Its software holdings, which make up 58 per cent of the portfolio, include Experian, Relx and LSEG, which came under pressure when investors grew jittery over the impact of artificial intelligence.
Changes: Finsbury Growth & Income Trust plans to ‘enhance’ its dividend policy, increase gearing and reduce management fees
Train said the debate had been ‘couched in terms of that threat, risk and share price downside’, but if his analysis is correct, all of the companies will report ‘notably higher profits in five years’ time’.
Instead, the sell-off in data firms ‘could offer a once-in-a-decade opportunity’ to access assets at ‘fundamentally the wrong price’.
He also pointed to difficulties among its consumer brands, namely Diageo and Burberry which had been ‘painful’ for investors over the last three years and ‘severely tested their patience’.
Train doubled down on his investment approach and pledged not to sell out of the trust’s core holdings but buy more.
Chair Pars Purewal pointed to ‘early signs of stabilisation’ but pledged to do ‘whatever it takes’ to boost shareholder returns, which includes a refresh of its dividend policy and a reduction in management fees.
FGIT’s annual dividend will rise by at least 50 per cent to around 30p per share, from around 20p currently, lifting the current yield from approximately 2.6 per cent to 3.9 per cent.
The trust said dividend payments, which will move to a quarterly schedule, would be set on a pence-per-share basis rather than by reference to NAV or share price, giving shareholders greater clarity over income.
Finsbury’s board said it had agreed with portfolio manager Lindsell Train that the group would use gearing of up to £100million, reflecting its view that UK equity valuations were attractive.
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