Back when Asset Allocator was but a twinkle in a publisher’s eye, Terry Smith and Nick Train dominated the global equity sector
The marmalade dropping stat we picked up was that in 2018 - the year we launched - around £94 of every £100 being allocated to mandates within the IA Global sector went to Fundsmith Equity and Lindsell Train Global Equity, with the other 300 or so funds left to fight it out for the remaining £6.
At the time both funds performing strongly, but they had much else in common with the managers holding each other in high regard and both advocating a style of quality growth investing that focused more on the consumer staple than fast-paced tech.
But since those heady pre-pandemic days, the two funds have gone down very different paths.
In performance terms, Fundsmith has kept its head above the peer group, returning 27 per cent over the past three years, compared to the peer group average of 23 per cent. But Train’s fund has delivered a paltry 12 per cent, being bottom quartile over all appreciable time periods.
And the allocators we cover have certainly delivered their verdict, with Terry Smith’s product comfortably the most-owned among the allocators we cover, appearing in nine portfolios and picking up a new buyer in the first quarter of 2024.
In contrast, the Lindsell Train Global Equity fund now appears in just one of the portfolios we monitor.
A clear hint as to what might be driving the diverging performance can be seen in the relative US exposures: Lindsell Train has 34 per cent there, around half the index weight, while Fundsmith has 69 per cent there, broadly in line with the index weight.
But it’s when it comes to technology exposure that the biggest surprise can be found.
Fundsmith has 22 per cent of its capital deployed there, with two of the magnificent seven - Microsoft and Meta - among the top three holdings.
But Lindsell Train, despite the underperformance, has more deployed in tech, at 32 per cent, behind consumer goods as the second largest exposure.
None of the top 10 holdings in this mandate are US tech stocks, though the largest is a technology business - Nintendo, the share price of which is up 45 per cent over the past year.
As Ben Yearsley, director at Fairview Consulting, points out: Fundsmith has pivoted towards a more fundamentally “growth” strategy in recent years by owning technology stocks, while Lindsell Train has retained its traditional “quality” focus.
Yearsley remains keen on the Lindsell Train fund as he believes it will return to form when inflation is a less dominant theme in markets. But it has certainly taken a hard path to get there.
