Lindsell Train Global Equity

Prism

Sailtheworld said:

Prism said:

Johnnyboy11 said:

Unilever at 8.81% and the top five holdings nearing 40% of the fund. To me this seems like an extremely risky proposition, something is up with LTGE...

Unilever has been around an 8% holding in LTGE for the last 5 years. Its a high conviction fund with around 20 or so holdings. If you were ok with that a few years ago why the change of heart. However I have a fund with 6 of its holdings above 10% so maybe I am bias.

The change of heart is probably because past performance was good but recent performance has been pedestrian.

5 years ago the fund was £1,208m in size and today it's £7,776m - it's new money drawn in by past performance. It was 'only' £5.672m in January 2019 so a good proportion of the capital is very new and somewhat disappointed.

It'll be the same for a lot of today's flavour of the month funds - lots of new money hoping for yesterday's performance.

It is as though people don't research the funds to see what they invest in. If we take a proxy to some of the individual components of the global equity fund we can see according to Trustnet that the Lindsell Train UK fund is currently 28th out 243 funds YTD with only a small loss and is easily beating the FTSE index. The Lindsell Train Japan fund is right in the middle, 32nd out of 68 and is just about pipping the index. Thats about 65% of the global fund in regional allocation. The US holdings are a mixed bag but I would call them up YTD with plenty of 'tech' holdings like Paypal, Intuit and Ebay. Noticeably there is almost no healthcare.

The problem, if there is one (which there isn't IMO), is that almost everything is doing reasonably well within the fund but many other US tech heavy global funds are doing much better because that has done really well this year. Personally I don't want another tech heavy global fund as there are plenty of those around. Lindsell Train GE is good at doing something different, but different doesn't always work year in, year out.

itwasntme001

Prism said:

Sailtheworld said:

Prism said:

Johnnyboy11 said:

Unilever at 8.81% and the top five holdings nearing 40% of the fund. To me this seems like an extremely risky proposition, something is up with LTGE...

Unilever has been around an 8% holding in LTGE for the last 5 years. Its a high conviction fund with around 20 or so holdings. If you were ok with that a few years ago why the change of heart. However I have a fund with 6 of its holdings above 10% so maybe I am bias.

The change of heart is probably because past performance was good but recent performance has been pedestrian.

5 years ago the fund was £1,208m in size and today it's £7,776m - it's new money drawn in by past performance. It was 'only' £5.672m in January 2019 so a good proportion of the capital is very new and somewhat disappointed.

It'll be the same for a lot of today's flavour of the month funds - lots of new money hoping for yesterday's performance.

It is as though people don't research the funds to see what they invest in. If we take a proxy to some of the individual components of the global equity fund we can see according to Trustnet that the Lindsell Train UK fund is currently 28th out 243 funds YTD with only a small loss and is easily beating the FTSE index. The Lindsell Train Japan fund is right in the middle, 32nd out of 68 and is just about pipping the index. Thats about 65% of the global fund in regional allocation. The US holdings are a mixed bag but I would call them up YTD with plenty of 'tech' holdings like Paypal, Intuit and Ebay. Noticeably there is almost no healthcare.

The problem, if there is one (which there isn't IMO), is that almost everything is doing reasonably well within the fund but many other US tech heavy global funds are doing much better because that has done really well this year. Personally I don't want another tech heavy global fund as there are plenty of those around. Lindsell Train GE is good at doing something different, but different doesn't always work year in, year out.

People tend to focus on short term performance and chasing.  Problem is markets are generally efficient so once one sector is "fully priced", money flows to the next.  If you look at the returns by sector going back 80 years, all sectors produced overall very similar returns.  We could be at the peak in tech returns or it may still have some more to go.  Who knows.  I certainly don't.

Johnnyboy11

Thrugelmir said:

Johnnyboy11 said:

Unilever at 8.81% and the top five holdings nearing 40% of the fund. To me this seems like an extremely risky proposition, something is up with LTGE...

Risky in what sense? 

Well, as an example, if Unilever share price fell 50%, it would wipe out all of LTGE returns for the past year, before fees are applied. There are four other companies in the 7-8% holding range, two of them flogging booze. I think it is risky, but then again, I'm not a star fund manager.

Prism

Johnnyboy11 said:

Thrugelmir said:

Johnnyboy11 said:

Unilever at 8.81% and the top five holdings nearing 40% of the fund. To me this seems like an extremely risky proposition, something is up with LTGE...

Risky in what sense? 

Well, as an example, if Unilever share price fell 50%, it would wipe out all of LTGE returns for the past year, before fees are applied. There are four other companies in the 7-8% holding range, two of them flogging booze. I think it is risky, but then again, I'm not a star fund manager.

If this worried you why did you invest in the first place. I agree that there is increased risk having large holdings like this in a fund though it doesn't seem to make the fund more volatile and the types of holdings that LTGE holds are unlikely to make 50% moves.

itwasntme001

Sailtheworld said:

itwasntme001 said:

Sailtheworld said:

itwasntme001 said:

Sailtheworld said:

itwasntme001 said:

I keep hearing that young people should be invested close to 100% equities.  I am in my 30s and I am reducing my risk.  Never was 100% equities.  At a cost of lost opportunity, I sleep well at night.  I am looking to reduce risk from 60-70% equities down to 50% equities.  Almost all remaining investments in active funds.

This year has been a gift for people who really want to consider portfolio allocation.  Use this time wisely.

When you're, say, 30 you're already taking a lower risk. You've got decades of earnings ahead and the timeframe to ride out numerous negative events and still come out on top. Choosing 50% equities is choosing lower returns i.e. expensive sleep.

I completely agree.  But I see things slightly differently.  Whilst risk generally comes with reward, it by no means is guaranteed even in the longer term.  IMO I rather place my capital in assets with better risk reward and at this stage, public equities like tracker funds do not offer this.

The difference is you're claiming an investment edge because you're saying you can identify which assets have the best risk to reward ratio. Nothing wrong with that of course but you're going to be talking at slightly cross purposes with those that don't  - they have to use the rather blunt instrument of equity % to adjust risk.

Of course you sleep well.

Not claiming to have an edge in anything.  All the information I have read is available to the general public.  Future expected returns are going to be low at these levels.  Merely saying the risk reward is not there and its more optimal to invest in other assets.  Crucially diversification matters more so then ever before.

Knowing that equity returns from the FTSE All World Index will be 0% for a decade is a huge advantage. I think it hit a record high today so the other market participants have a different view.

Crucially you're not diversifying (why would you?) but concentrating non-equity risks.

A global multi-asset market portfolio only allocates about 40% to public market equities.  Based on your argument that the market is always correct (which I am not disputing), doesn't this mean that everyone should just have 40% of their portfolio in equities?

Thrugelmir

Johnnyboy11 said:

Thrugelmir said:

Johnnyboy11 said:

Unilever at 8.81% and the top five holdings nearing 40% of the fund. To me this seems like an extremely risky proposition, something is up with LTGE...

Risky in what sense? 

Well, as an example, if Unilever share price fell 50%, it would wipe out all of LTGE returns for the past year, before fees are applied. There are four other companies in the 7-8% holding range, two of them flogging booze. I think it is risky, but then again, I'm not a star fund manager.

Investing is a continual learning curve. Our own experience shapes viewpoints.

[Deleted User]

Seen some disquiet on here recently over Vanguard and now Lindsell Train funds. Sure enough, it follows diminishing year on year performance. As itwasntme101 explains above, it's a bit of a vicious circle for percentage chasers..

You should not make an investment on the basis of how much it has risen in the past twelve months, and you shouldn't sell it on that basis either (rebalancing is a millstone around the neck of many a fund manager). 

Johnnyboy11

Well I stuck with LTGE and enjoyed a 7% increase over the last quarter of the year, which was nice. Happier now that I was back then Some great post received that made me think again about selling, cheers!

Johnnyboy11

Any suggestions on rebalancing my year end position? I'm thinking less bonds, less cash, more equities and probably less US/UK focussed. Was looking at puting a sizeable chunk of cash into Vanguard ESG EM All Cap Equity Index  to dial up the risk a bit. Here's where I landed:

45% - Vanguard LifeStrategy 60% Equity

10% - Vanguard FTSE Developed World  ex-UK Equity Index
15% - Fundsmith Equity
10% - Lindsell Train Global Equity
20% - Cash

csgohan4

Johnnyboy11 said:

Any suggestions on rebalancing my year end position? I'm thinking less bonds, less cash, more equities and probably less US/UK focussed. Was looking at puting a sizeable chunk of cash into Vanguard ESG EM All Cap Equity Index  to dial up the risk a bit. Here's where I landed:

45% - Vanguard LifeStrategy 60% Equity

10% - Vanguard FTSE Developed World  ex-UK Equity Index
15% - Fundsmith Equity
10% - Lindsell Train Global Equity
20% - Cash

Have you considered sector based investments? Renewable energy is popular at present
or geographical such as pacific, China e.t.c