Hello, I'm pleased to be joined by Nick Train from the Finsbury Growth and Income Trust. So Nick, great to see you. Hope you're well.
I am extremely well, thank you. Raring to go for a new year.
So it's been a hundred years since Finsbury Growth and Income launched. How has the investment process actually changed during all those years?
Well, Dan, I must admit I'm not a historian of the hundred years of Finsbury's existence, but I have to say I think it is worthy of note that I myself have been responsible for the investment affairs of that company for a quarter of a century, which if my math is correct means that that's a quarter of the entire history of the company has been down to me and my colleagues. The previous manager had a very, very different style. My recollection is that it was small cap growth oriented but with high levels of portfolio turnover. And for those of you who know anything about us, it's completely the opposite. We're kind of big company but with a growth tilt, very concentrated and very, very low turnover. So whatever it is, we're pretty much the mirror image of the previous manager.
So what would you say are your biggest victories since you took over running this trust?
I've been really influenced by Warren Buffett and Charlie Munger, by Berkshire Hathaway, and I'm proud of the fact that for at least the first 20 or 21 years, we did really well out of long-term ownership of beloved consumer brands, you know, and that's a big Buffett theme, or it was a big Buffett theme, Coca-Cola, brands like that. And you know, when I look back at the track record for Finsbury, we made a lot of money for investors in Cadbury. We made a lot of money for investors in Irn-Bru, kind of the Coke of Scotland. We made a lot of money in Diageo as well for at least the first 22 or 23 years. We know what's happened to Diageo more recently. I'm going to just name a couple more if I may. So pleased and proud that we recognized that London Stock Exchange Group and Relx were and still are two London-listed kind of data tech type businesses with just incredible growth opportunities. We've owned both of those for over 20 years. They've been big drivers of our returns and I think those two businesses are just getting started really.
What would you say your biggest mistakes have been? I guess every fund manager can't expect to do well all the time every single year.
Well, yeah. No, I've been doing it long enough to, I can show you the scars from that. An archetypal mistake for us, for me, let's be personal about it, that shows the best and maybe the worst of our sort of approach to the investment challenge. I owned Pearson for 17 years and through that 17-year period, that's patient. Yeah, I said earlier we're patient. We were waiting for Pearson to demonstrate that it could turn itself into the sort of business that I've just mentioned, Relx, that Pearson maybe was going to be able to turn itself into a digital growth business like Relx. And for a variety of reasons, I don't really think it was the company's fault. It's more the sector it was in. That just didn't happen. But in hindsight, maybe it would have been better to have given up on that idea after five years rather than waiting for 17. Is that a mistake? I don't know. Patience is a virtue, but sometimes you can be patient to a fault and maybe we were there. I don't know.
So, obviously you've had a period of underperformance more recently. What's the board of Finsbury Growth and Income actually done to challenge you about this? Have they said you're picking the wrong stocks or do you want to try something different?
Yeah. Listen, taking a step back, this, the question you ask to me, this is why investment trusts are such attractive vehicles for private investors, that unlike, you know, a unit trust or a mutual fund, there is an independent board and that board is mandated to do whatever it can to maximize value for the underlying shareholders. Got shareholders' backs and I always think that's a very reassuring aspect of an investment trust. The Finsbury board has got a number of, well I'd say all of them have got a different set of experiences and/or expertises relating to industry and relating to investments and they definitely have points of view [laughter] and, you know, as directors of, let's be candid about it, an underperforming investment trust, there is pressure on them and they need to be seen to be responsive to that and doing whatever they can to make things improve. What I would say with the Finsbury board is that that board understands clearly that Lindsell Train has a disciplined, clear investment approach that we've implemented for a quarter of a century and they're not asking us to change what we do. They have quite rightly challenged us on individual holdings that haven't been working. But I think ultimately, if I may speak for the board, and perhaps I shouldn't, but if I'm speaking for the board, I would say that the board's pressure on me is to do the very best we possibly can within the disciplines that we've explained to shareholders that we're going to stick to. And the board have been very supportive. I think...
You've got a continuation vote. Why haven't we had one until now? Is it just that because the long-term record under your management has actually been very good, so no one's really worried about it? But you know, I'm just wondering what's been the, obviously the, is the trigger for this continuation vote the persistent underperformance more recently?
Yeah. Yeah. Essentially. I mean, listen, I think that this decision, and of course it's a board's decision and I need to be careful what I say really because it really is within their domain, this decision. But from my perspective, what I've said to the board is that I think that calling this continuation vote, this is good corporate governance. The board has publicly said they support our investment approach, but they wanted to establish whether shareholders agreed that this investment approach should continue. By calling the continuation vote, it's given an opportunity for shareholders to have a big think and also to engage with the board and there has been quite a lot of engagement between shareholders and the board and I think, you know, that is commendable. I want to say just one other thing about the continuation vote. I said I thought it was good governance. I just want to be clear. I personally own quite a big percentage of this company. But I have decided, I must admit, with the advice of our compliance officer, I've decided that I'm not voting my shares on the continuation vote. I just felt uncomfortable that there could be a perceived conflict of interest if I was voting to continue the existence of a company where we have a commercial relationship. I thought it was better that shareholders who are not service providers actually determine the future of the company. I don't want anybody to construe the fact that I'm not voting as that somehow I don't care or I'm not committed.
