The Lindsell Train Global Equity fund and the Lindsell Train UK Equity fund – which are both managed by star portfolio manager Nick Train – have been two of the top performers within their respective fund sectors in recent years. Returning 182% and 96%, respectively, over the last five years, these funds have been absolutely brilliant for UK investors.
However, in a shock development this morning, online broker Hargreaves Lansdown – the UK’s largest fund platform – has announced it will be removing both of these funds from its ‘Wealth 50’ best-buy list. So what’s going on? Does this development mean you should sell your holdings in these funds?
Conflicts of interest
The reason that both have been removed from the Wealth 50 comes down to conflicts of interest. You see, Train is a big fan of Hargreaves Lansdown shares and the stock is held – with large weightings – in both of his equity funds. He has actually been boosting his stake in the stock this week as well. Just last night, Hargreaves announced that Lindsell Train has boosted its stake in the company from 11% to 12%.
It’s not hard to see this adds complications for Hargreaves. Yes, the funds have performed brilliantly and fully deserve to be on a best-buy list, but with large positions in Hargreaves stock, there are clear conflicts of interest here.
As a result, Hargreaves has taken the somewhat sensible decision to remove the Lindsell Train funds from its Wealth 50. Ultimately, the decision has been made to protect the interests of its clients and shareholders and the independence of its investment process. It’s a smart move after the recent Woodford suspension scandal.
Unrelated to performance
Importantly, Hargreaves has said the decision to remove the funds from the Wealth 50 is nothing to do with performance. Hargreaves advised: “We continue to have high conviction in managers Nick Train, Michael Lindsell, and James Bullock and their ability to outperform in the future.”
Should you sell your Lindsell Train funds?
Does this news mean that Lindsell Train equity funds are no longer good to own? Not at all. Train and his team have delivered fantastic returns for investors in recent years and there’s no reason to believe they won’t continue to outperform in the future.
Personally, I really like Train’s investment style – the fund manager simply focuses on high-quality companies that are very profitable and holds these companies for the long term (it’s quite similar to Warren Buffett’s approach). Looking at the long-term returns of the fund, it’s an investment strategy that clearly works for Train.
In my view, if you’re looking for high-quality, cost-effective, actively-managed funds, Lindsell Train’s are hard to beat. I own both funds in my portfolio and I have absolutely no intention of selling them now they’re no longer in the Wealth 50.