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3 Reasons Why Finsbury Growth & Income Wins Gold

VIDEO: The extensive experience of this investment trust's manager, the proven process, and the very good fee structure earn it a Gold Analyst Rating

Holly Cook 6 November, 2012 | 2:34PM

Holly Cook: Morningstar analysts rate well over 1,000 funds and to talk about one specific rating, I'm joined today by Szymon Idzikowski, a closed-end fund analyst. Szymon, thanks very much for joining me. 

Szymon Idzikowski: Thanks for having me. 

Cook: So we're talking today about Finsbury Growth & Income (FGT) and you’ve rated that Gold. What is it about this fund that you find attractive? 

Idzikowski: We find this fund quite unique and when you talk to [manager] Nick Train the way he describes what he does, is that it’s a working experiment of taking the investment principles of Warren Buffett and applying them to the UK market. So when you look at his portfolio there are three quite distinguished features. The first one is when Nick looks for stocks, he selects companies that he considers to be the best of breed, with rare and outstanding franchises, with very often a lot of history, a lot of experience with dealing with different market conditions. So you’ll see names such as Guinness, which is 260 years old, you will see Uniliver and similar names. The second distinguished feature is the concentration. This is really a high conviction portfolio—23 stocks, that's a very, very high conviction. The third thing is his long-term approach. Over 12 years, since Nick took over this fund, the turnover averages at only 6%, which is very low.

Cook: So how has this process actually worked out from the investor’s point of view? 

Idzikowski: Very well actually. The fund has comfortably outperformed its peers, but what is more is it has done this without taking excessive risk. So the fund tends to loose less in down markets and it's less volatile overall. 

Cook: Well, this is sounding very positive, I'm sure you're going to tell me that you've got some concerns as well? 

Idzikowski: There are a couple of issues that I believe investors should be aware of. The first one is Nick’s workload. So, he is a founding partner of Lindsell & Train and he is also involved in running for funds. That sounds like a lot, but then when you again understand his process, he takes a very long-term approach which means that he has time to understand his investible universe. 

Also in this fund, at Finsbury Growth & Income, the board has appointed Frostrow Capital to do non-investment functions, enabling Train to focus on management, right? The second thing is the key man risk; the fact that the number of people in Lindsell & Train is quite limited, there are three investment professionals which means that there could be some concern about the succession of Nick. 

Cook: So, at first glance you might think the workload is a lot and that might be a concern, but you are saying that the way the fund is setup actually means that you're not worried about it because manager Nick Train can focus on actually running the fund. And meanwhile, the only other concern would be that there are so few people that are actually running the investments that potentially there is a succession concern? 

Idzikowski: Yeah. I think that's fair to say. 

Cook: Okay. So, overall how would you sum up your view of the fund? What warrants a Gold rating? 

Idzikowski: Well there are a number of things we really like about the fund: it’s an experienced fund manager, the process is tried and tested and it has delivered over his tenure, and there is a very good fee structure. 

Cook: Great. Well, thanks very much for explaining your rating for us today Szymon. 

Idzikowski: Thanks for having me. 

Cook: For Morningstar, I'm, Holly Cook, thanks for watching.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Finsbury Growth & Income Trust Plc512.00 GBX-0.78
Unilever PLC2,684.00 GBX-0.30
About Author Holly Cook

Holly Cook  is Managing Editor of Morningstar.co.uk