Lindsell Train Investment Trust: A Deep Dive

Lindsell Train Investment Trust (LTI), managed by the renowned investment partnership of Nick Train and Michael Lindsell, stands as a distinctive player in the investment trust landscape. Its concentrated, high-conviction approach, centered on owning a relatively small number of exceptional companies for the long term, has garnered significant attention and, historically, impressive returns.

Investment Philosophy and Portfolio

The core of LTI’s strategy revolves around identifying businesses with enduring brands, strong recurring revenues, and robust balance sheets. These are typically companies that possess pricing power, generate significant cash flow, and are resistant to disruption. The managers believe that such companies, held for extended periods, can deliver superior returns through compounding growth and dividend reinvestment.

The portfolio reflects this philosophy, with substantial holdings in consumer brands, media companies, and platform businesses. Prominent examples often include names like Burberry, Diageo, Nintendo, and the Lindsell Train Limited investment management business itself. This concentrated portfolio approach means that the trust’s performance is heavily influenced by the performance of these key holdings. This, in turn, makes it crucial for investors to understand and agree with the managers’ long-term outlook for these specific companies.

Performance and Key Considerations

Historically, Lindsell Train Investment Trust has delivered exceptional performance, outperforming its benchmark (the FTSE All-Share Index) over many years. However, past performance is not necessarily indicative of future results. The concentrated nature of the portfolio means that performance can be volatile, and periods of underperformance are inevitable, especially if one or more key holdings face challenges.

A significant factor to consider is the persistent premium at which LTI shares trade relative to their net asset value (NAV). This premium reflects investor demand for the trust and its unique investment approach. However, a high premium also introduces additional risk. Should investor sentiment shift or the trust’s performance falter, the premium could contract, leading to a greater share price decline than the underlying NAV decline.

Another consideration is the exposure to unquoted investments, particularly Lindsell Train Limited. While this provides access to a private asset, it also adds complexity and can make valuation more challenging. The valuation of unquoted assets can be subjective and may not always accurately reflect market conditions.

Suitability for Investors

Lindsell Train Investment Trust is generally considered suitable for long-term investors who are comfortable with a concentrated portfolio, understand the risks associated with a high premium, and have a high tolerance for potential volatility. It’s essential for investors to conduct thorough due diligence, assess their own risk appetite, and consider whether LTI’s investment philosophy aligns with their own investment goals.

Before investing, potential investors should carefully review the trust’s key information document (KID), annual reports, and consult with a financial advisor to determine if it’s an appropriate addition to their investment portfolio.