Lindsell Train

LookingForTheSun wrote: »

I was going to invest in LT class D income on HL, the fund price has increased from £1.6 to £2 since the start of Jan, a 20% premium, looking at a sample of the top 10 holdings (Pepsi, Diageo, Unilever, etc) they've lost around 6% since the start of the year. I can't see a good justification for the price increase

The answer is simple, you are looking at a price change from Jan 2017 over which time it has gone up from the £1.60 range to the £2.00 range.

If you look at the performance from the start of January 2018 , the almost five month period over which you were looking at Pepsi or Unilever's price, you'll see it was £2 then, which is similar to what it is now.

It's an open-ended fund priced daily in line with the values of the assets it holds. So it's value is justified by what it owns, because it's value *is* what it owns.

That's a different system to the Lindsell Train investment trust plc, which is valued by the stock market based on supply and demand. A large component of the value of the investment trust is its ownership of the Lindsell Train management company, which is a private business and buyers of the trust will all have their own opinions on what that's worth, aside from the merits of being invested in Unilever and Diageo and Nintendo etc.

So the investment trust (but not the global equity fund you're talking about) might have a price on the stock market that is higher than the declared value of the underlying assets.

other than people jumping on the band wagon due to advertising and the fund being listed in some top 10 lists.

The fact that an open ended fund like lindsell reason global equity is popular or heavily advertised by HL etc increases the amount of money invested in the fund and generally might be expected to lower the operating costs per pound invested (to some extent) as the fund gets bigger over time. It doesn't change the price you pay, because the price you pay is based on the value of its assets and liabilities at the point you invest.

Which is different from the price you might pay for their investment trust, because the price to buy the investment trust is based on supply and demand for the shares of the trust on the open market.

LookingForTheSun wrote: »

Thanks bowlhead, my mistake - I had the wrong dates in mind when I made that statement! I'll take another look at the fund before - I'm looking for a long term investment that's "relatively" safe with a return of around 7%, this seems like one of the better options on the market

It is a decent fund IMHO. However:

Funds that invest 100% of their money into equities (company shares) are considered riskier and more volatile than investment funds which invest into other asset classes too (like bonds, commercial property and other types of stuff)

Then, compared to the average fund that invests around the world exclusively in equities, it is a higher risk option than average because the manager selects a pretty concentrated set of stocks that he like to invest in, with only between 20 and 35 holdings at any point in time. 60% of the fund was in just ten companies at the end of March. Yet there are tens of thousands of companies in the world to choose from. So the manager is following his personal convictions strongly and in a global market crash you should not be in any way surprised to see the value drop by more than a half. The fund's objective is to deliver capital growth and income over the long term but there's no guarantee it will do that and unlike more defensively-positioned funds it does not have an objective of preserving capital.

So, if you are describing it as a "relatively safe" investment, that needs a lot of context of what you are comparing it to.

Sure, a fund that invests in Iranian tourism, Chinese copyright infringement gangs or Nigerian identity thieves, or a fund that invests only in private startup businesses which aren't listed on any stockmarket, is probably "relatively unsafe" on your scale which rates this fund as "relatively safe".

However a fund such as this - with only 20-30 investments in businesses such as Nintendo, Heineken, Pepsi and the company that operates the London stock exchange - is not particularly "safe", just because those businesses sound like respectable companies and you've heard of them.

Over the long term, the fund will probably hit your annualised 7% target if you leave it long enough, like a couple of decades. If you are looking at returns in the factsheets or charts to date, remember the fund only launched in March 2011 - two years after the bottom of the market was reached in the last major global financial crash and was going back up again; it has been relatively good news in world markets for the last seven years straight, with just a few blips along the way. The fund has done very well and exceeded your target by a decent amount, but you haven't seen it go through a worlwide market crash to know whether, if global indexes drop 40%, whether this fund will drop 20% or 60% or more.

LookingForTheSun wrote: »

I'm looking for a long term investment that's "relatively" safe with a return of around 7%, this seems like one of the better options on the market

When you find one let me know. Those are high hurdles to achieve consistently year in year out.

Hence why diversification is key to investing. Being in the right fund at the right time is nigh impossible.