This Active Fund Has Outperformed Since 2011

By focusing on cash-generative international companies, this fund has smashed the market

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Rupert Hargreaves
Mar 26, 2021
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I recently highlighted a U.K.-based investment fund's track record, which was Fundsmith Equity.

While U.K.-based and aimed primarily at U.K. investors, the firm invests all over the world. More than two-thirds of its assets are invested in the U.S. By focusing on "a small number of high quality, resilient, global growth companies," Fundsmith Equity returned 440% in the past decade, an annualized return of 18.2%.

This isn't the only U.K.-based fund that has knocked the ball out of the park over the past decade.

Quality and cash

Lindsell Train Global Equity is another U.K. fund that's smashed the market over the past 10 years. Managed by Nick Train, the fund returned 362% from its launch in March 2011 to the end of 2020. That compares to 211% for the MSCI World index.

Once again, this is a U.K.-based fund that is not constricted to the country's borders.

At the time of writing, around a third of assets are invested in its home nation, but 31% are invested in the United States, 22% in Japan and the remainder is invested across Europe.

Train likes to buy high-quality companies. That means businesses that have a solid competitive advantage and, most importantly, generate lots of cash. Train also believes holding a concentrated portfolio is the best strategy. In an interview in 2019, he said:

"It is easy in this business to dilute your best ideas because there always seems to be another idea just around the corner. Earlier in my career I was guilty of this you're not paying attention and suddenly you end up with 70 holdings. We've always wanted to focus, focus, focus."

In the same interview, the fund manager said

Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio) had had an enormous influence on his investment style:

"Buffett and (his partner Charlie) Munger are the reason Lindsell Train is in business. We have a huge debt of gratitude. Their track record is unbelievable, but at the same time, their transparency and willingness to share the principles that have allowed them to achieve that track record is such an act of generosity."

Train manages several U.K. funds. Some of these may not be available to international investors. However, he also supervises two investment trusts. These are essentially investment companies and are traded like exchange-traded funds.

The Finsbury Income and Growth Trust is one of these vehicles. The other is the Lindsell Train Investment Trust. This company owns a portfolio of stocks, but it also holds a significant interest in the management company that oversees Train's other funds.

Largest holdings

The most significant five holdings in the fund manager's flagship fund account for 37% of assets.

The largest holding is the London Stock Exchange (

LNSTY, Financial), closely followed by drinks giant Diageo (DEO, Financial).

The top two holdings are U.K.-based businesses. The third is Nintendo (

NTDOY, Financial).

In the top 10 holdings of the global equity investment fund, there are three U.S.-based businessesthese make up around 14% of assets in total.

The largest is Walt Disney (

DIS, Financial), accounting for 4.8% of assets. This is closely followed by Mondelez International (MDLZ, Financial) and PepsiCo (PEP, Financial).

Train and Fundsmith are some of the best-performing actively managed funds available to investors around the world today. They both follow a similar strategy, but what's really interesting is the different makeup between the holdings of these investment companies. They show there is more than one way to invest in high-quality companies, and these businesses can be found all over the world.

Something in common between both funds is the fact that they are happy to invest a significant proportion of their assets in their top ideas. That's food for thought.

Disclosure: The author owns shares of Diageo.

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Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors. Rupert holds qualifications from the Chartered Institute for Securities & Investment and the CFA Society of the UK. He covers everything value investing for ValueWalk and other sites on a freelance basis.