Opinion  

The curious case of Hargreaves Lansdown’s spat with Lindsell Train

David Thorpe

David Thorpe

The recent criticism by Hargreaves Lansdown of Lindsell Train's management practices has left many people scratching their hands, and scrutinising the somewhat symbiotic relationship between the two.

Nick Train, co-founder and significant shareholder of Lindsell Train, endured a rocky 2022 as the kind of stocks he has long preferred fell sharply from favour; however, in a more recent update to clients he said he has the confidence to state that “things seem to be getting better” for clients in his funds. 

And the data gives some credence to that claim. The Lindsell Train UK Equity fund has returned 12 per cent in the year to May 25, compared with 2 per cent for the market as a whole. 

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However, the ravages of the previous 18 months or so of poor performance is evident in the size of the fund, dropping from £6.5bn in June 2021 to £4.6bn today. 

The global equity fund has returned around twice the sector average over the past 12 months, but has also bled money over the past 18 months, dropping to £5.5bn from the £8.8bn in June 2021.

The improved performance might be expected to contribute to better inflows into the funds, but any momentum the folks at Lindsell Train may have felt coming their way may have been dented by commentary from Hargreaves Lansdown.

In a recent note published on its website, the company said that it had concerns around “the capabilities and resource that the Lindsell Train business has in place to provide effective challenge to the investment teams.” 

The Hargreaves Lansdown note states they have had conversations with Lindsell Train about this, and are unhappy with the “progress” made since then. 

It has long been a feature of industry chatter that the Lindsell Train business is wildly profitable and has managed to grow without acquiring the bureaucracy of some larger firms. 

Companies House data shows the company made a profit of £65mn, with the total number of employees being 22, of which six work in the fund management department.

Hargreaves Lansdown notes the reason for their concern is around whether there are sufficient people within the company to challenge the decisions of the investment team, where the funds have as lead managers founders Mike Lindsell and Nick Train, as well as James Bullock. 

Train is certainly a high conviction investor, saying all of his holdings must fit within four key investment themes, and generally his sell discipline is “never to sell.” The latter was borne out in 2022, when the funds were struggling in performance terms and no holdings were sold. 

Lindsell Train has been explicit that succession plans are firmly in place, with James Bullock, who has been with the firm since 2010, now a named manager on the mandates, while there are also deputy and assistant fund managers.