The Lindsell Train investment trust has warned new investors that one of its key holdings could take a hit if markets suffer a downturn.
45 per cent of the trust’s total assets are in Lindsell Train Limited, the fund manager founded by Nick Train and Michael Lindsell, which makes up the trust’s largest holding.
While the valuation of that holding was up 23 per cent over the last six months, and was the biggest contributor to performance, the trust has warned that a global stock market fall could hurt the manager, and therefore the trust’s holdings.
The trust’s chairman Julian Cazalet wrote in financial results this morning that a downward market trend could negatively impact LTL’s profitability and eventually its dividend
Cazalet notes that the share prices of larger fund managers has fallen recently, some by as much as a by quarter, also reflecting an increase in passive management at the expense of active which could continue as a trend.
However, Cazalet says: “LTL’s funds are the antithesis of passive and have generated superior long-term returns to the index, so they should be less affected by the trend to indexation.”
He added that the poor share price performance of quoted fund management companies is indicative of pressures on the wider industry.
LTL saw its funds under management rose from £13.4bn to £16.1bn.