Lindsell Train UK Equity vs. Finsbury Growth & Income IT

aroominyork

I am trying to understand the difference in performance between LT UK Equity and the Finsbury IT. You could fit only a thick a cigarette paper between the two sets of holdings and Nick Train said in an interview “There are very marginal differences between the two which are historic or structural. We said we would make them as comparable as possible and I would sack myself if performance was markedly different between them.”

But performance suggests it’s not as simple as that (data from HL):

The OEIC has returned 19.06%, 16.05%, 0.35%, 27.13%, 13.34% over the last five years, 13.34% being the most recent.

The IT’s premium hovers between zero and 1% so can be ignored, and the Trust has low gearing (“I am allergic to debt so Finsbury has only modestly borrowed in the past ten years”). Yet it consistently underperforms the OEIC: the Trust has returned 12.07% over one year (13.4% is the equivalent OEIC return), 41.6% over two years (OEIC 44.1%), 38.04% over three years (OEIC 44.6%), 81.86% over five years (OEIC 99.8%).

Can anyone explain the difference?

george4064

aroominyork wrote: »

I am trying to understand the difference in performance between LT UK Equity and the Finsbury IT. You could fit only a thick a cigarette paper between the two sets of holdings and Nick Train said in an interview “There are very marginal differences between the two which are historic or structural. We said we would make them as comparable as possible and I would sack myself if performance was markedly different between them.”

But performance suggests it’s not as simple as that (data from HL):

The OEIC has returned 19.06%, 16.05%, 0.35%, 27.13%, 13.34% over the last five years, 13.34% being the most recent.

The IT’s premium hovers between zero and 1% so can be ignored, and the Trust has low gearing (“I am allergic to debt so Finsbury has only modestly borrowed in the past ten years”). Yet it consistently underperforms the OEIC: the Trust has returned 12.07% over one year (13.4% is the equivalent OEIC return), 41.6% over two years (OEIC 44.1%), 38.04% over three years (OEIC 44.6%), 81.86% over five years (OEIC 99.8%).

Can anyone explain the difference?

Is the OEIC performance the Accumulation version?

Is the performance of the IT price return or total return? (Price return would be markedly lower than total return because it won’t take into account dividends paid).

If I were to guess, the total return of the two investments are similar.

masonic

george4064 wrote: »

If I were to guess, the total return of the two investments are similar.

Almost identical:
https://www2.trustnet.com/Tools/Charting.aspx?typeCode=FL532,FITFGT

aroominyork

masonic wrote: »

Almost identical:
https://www2.trustnet.com/Tools/Charting.aspx?typeCode=FL532,FITFGT

Interesting - in fact this gives the edge to Finsbury. To answer George's point, the Inc and Acc returns are the same (within 0.01%) so it the explanation that the IT's returns are not based on reinvested income?

george4064

aroominyork wrote: »

Interesting - in fact this gives the edge to Finsbury. To answer George's point, the Inc and Acc returns are the same (within 0.01%) so it the explanation that the IT's returns are not based on reinvested income?

Where are you comparing the Inc and the Acc returns?

They’re probably practically the same because they’re showing net total returns (i.e. dividends reinvested). So it’s actually comparing Acc vs Inc with all dividends reinvested, hence pretty much identical performance.

Rollinghome

aroominyork wrote: »

Interesting - in fact this gives the edge to Finsbury. To answer George's point, the Inc and Acc returns are the same (within 0.01%) so it the explanation that the IT's returns are not based on reinvested income?

If you're thinking of buying you might want to look at other costs: any trading charges, the spread, SDRT, whether you'll pay an ongoing platform charge, and what class of the fund you can get. The standard OCF on the fund is 0.70% but class D (from HL and probably elsewhere) is 0.51%. I assume that chart is for the 0.70% fund class?

So the better choice could be down to the platform you use, how long you expect to hold, and a few other things.

Edit.HL seems to show total return over 5yrs on the LT class D fund (inc or acc) as 103.26% and for FGT 102.08%. Then you'd have buying costs on one but not the other plus a platform fee on one that you may or may not pay on the other, depending on what other holdings you have. On Iweb the numbers would all be different with no class D, fixed trading for either and no ongoing charges.

MK62

Plus, it would depend which day you did the comparison on.
The OEIC will always report it's NAV (it has to), whereas the IT's share price can swing around it's NAV depending on the market direction that day.

Then there's dividend dates, if different....and the IT's ability to smooth dividend returns, so the fund and the IT may not payout the same each year.....

Having said all that, if you used a long timeframe I suspect there will be little difference at the end of the day - plus as rollinghome said, you also then have to factor in your platform and dealing costs.

aroominyork

Thanks all. The key learning for me is that when platforms report IT returns there is inconsistency in whether they assume reinvested dividends. The Trustnet chart posted by masonic is the same as the chart on HL if you overlay Finsbury onto LT OEIC on the latter's 'Charts & Performance' tab, ie dividends are reinvested and the two are similar. However HL's page for Finsbury gives returns without reinvested dividends.

All the other points re fees, platform costs, NAV etc. are understood. I held the OEIC on HL in the unbundled D Class (0.51% OCF) but recently had to sell it and move into the inclusive 0.70% OCF when switching platform to Interactive Investor which does not offer the D class.

MK62

HL's fund page charting gives you the choice of price (without dividend reinvestment) and total return (with reinvestment) to choose from on the chart display.You can add ITs there as well as funds.
The share page charting (which is the default page for ITs) will give you the share chart, which isn't as good for that type of comparison.



Trustnet does the same, but you need to click on the "chart basis" tab - you then get offered the view with or without dividend reinvestment.

purple_rose

Rollinghome wrote: »

If you're thinking of buying you might want to look at other costs: any trading charges, the spread, SDRT,

I noticed on Iweb the FGT sell price is 804p and sell price on HL is 806p


Is this a common occurence that HL sells at a higher price? and whats the impact ?

george4064

purple_rose wrote: »

I noticed on Iweb the FGT sell price is 804p and sell price on HL is 806p


Is this a common occurence that HL sells at a higher price? and whats the impact ?

The difference is purely down to HL displaying a more up-to-date price (or perhaps more out-of-date price).

If you were to get a quote on FGT shares (or any other share) on both platforms at the exact same time, you would get the same price.