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Finsbury Growth & Income Trust의 Nick Train은 본인이 기본적으로 낙관적 성향이라고 밝히며, 기술 발전이 부를 창출하고 프리미엄·럭셔리 소비로 이어진다고 주장. AI 우려로 Relx, Sage, Experian 등 주가가 30~50% 하락했으나 과거 디지털 전환을 잘 버텨왔고 AI를 활용해 성장 중이라며 보유 입장 유지. 영국 대형주 중 Relx, Experian, Diageo, Burberry, Rightmove 등을 장기 보유 대상으로 제시하며, 정치 리스크보다 기업 펀더멘털에 집중해야 한다고 강조. 바이백은 성장 투자 후 잉여자본이 있을 때만 합리적이라고 평가.
다듬은 글
The Finsbury Growth and Income Trust has just celebrated its centenery in a period which has seen tremendous change politically, socially and technologically. Nick Train is a portfolio manager. He co-founded Lindel Train Limited back in 2000 when it took over the management of the fund. Nick, welcome.
Thanks indeed for joining us. Jeremy, thank you. Give us an update as to where you feel you are in what is now a period where we're seeing big change. Not with the fact you've had 100 years of it, but where you stand at the moment. How do you feel about the fun? I also just say I'm not 100 years old.
The company is um but we have been responsible I've been personally responsible for that investment trust for a quarter of a century which is a quarter of the life of the trust and I'm proud of that. I'm I'm I'm proud of that longevity. um performance has had its ups and downs over that quarter of a century and last two or three years have been quite challenging.
Um but that's part and parcel of investment markets. Um and the question is what happens to the net asset value and the share price from here? And in answer to your question, I would say that I am instinctively and by design a bull. I'm optimistic. I find it hard to conceive how anybody could be an equity fund manager without being natively an optimist.
And I do think that some of the factors that have presented challenges to Finsbury's portfolio of late are in fact just as credibly uh analyzed as huge opportunities for uh for Finsbur's portfolio. So yeah, I mean maybe maybe we might talk about artificial intelligence at at some stage, but just just putting AI in in context.
Um here we are in the third decade of the 21st century and I think two things are abundantly clear. One is that tech generally is creating enormous um investment opportunities and it's also at the same time creating enormous uh wealth uh in economies. Maybe that's not equally distributed around the world, but tech has created huge wealth and you can see that in uh consumer expenditure and the sort of things that consumers spend their income on.
Increasingly consumers are spending excess extra wealth on premium products, luxury products, heritager rich products and to me I'm essentially a believer that those trends of the last 25 years are going to continue that tech is going to create more wealth and that that wealth in part will be spent on premium or luxury products.
Now the more controversial proposition and I need to put this here uh just to lay it out is that Finsbury is today and has always been a UK equity investment trust. So we are looking within the context of the UK stock market to find businesses that we believe will give us access to those big overarching positive themes.
The UK stock market until really quite recently has been a very very disappointing index as everybody knows. It's been intensely frustrating for someone like me who's been a careerlong UK equity guy. Now listen, one's got to be very very careful about saying other investors are getting things wrong because other investors are smart and there's always two sides to any investment case.
But I I my working proposition is that contrary to common belief, the UK stock market is in fact home to a number of truly world-class businesses that are offering clear access to some of those big global growth themes. So just to name two and we can talk about them or come back to them. If you wanted to find a company in the world that was well positioned to exploit development in AI technology, I think anybody would acknowledge that Rellex is such a company that that is a globally significant business doing globally significant things with AI serving very very important industry verticals around the world.
to name another actually painful holding for us recently but it it doesn't detract from the proposition. We own Diagio. Whatever anybody thinks about Diego in the short term, Diagio is the world's biggest spirits company and owns the best brands in global spirits. That's been a tremendous investment for 27 out of the last 30 years.
And probably it's going to be a fantastic investment in 27 out of the next 30 years. And again, it's a UK company. It's a significant business that interests us. I want to dig down into both those areas, AI and consumers, uh, consumer goods, in just a minute. But before we get there, I just want to talk about um the last 25 years you've outperformed the market.
You it's been a really good return, but the last 5 years have been a little bit more difficult and you just had a continuation uh vote which you passed easily. Just explain what that does and how does that change anything for you? It's just a question of more or the same. It it doesn't it doesn't change anything for me personally or for our relationship with that investment trust.
Um I think as an example of good governance particularly after and I've already acknowledged this a period of performance that's not met my expectations and I know other shareholders expectations. The board of Finsbury offered a continuation vote to its shareholders saying actually nothing to do with me but saying should this company which happens to be 100 years old should it continue from here or would shareholders like it to I don't consider other options and I have to say again putting to the extent I can myself to one side of this.
I'm so delighted that I think 97% of those shareholders who voted said resoundingly this company deserves to exist and should continue. Whether that means we're responsible for another 25 years, I have no idea. Whether we're responsible for another two years, I have no idea. um be quite nice to be um uh uh responsible for another 25 years, 50 years of responsibility for an investment trust.
Really does have a bit of a ring to it. Um but we'll see. We'll see. Okay, let's pick up on these these big theme areas. AI clearly is occupying a lot of column interest in the press. A lot of investors are worried about it. How are you approaching declines in shares of these companies you mentioned like Relics and I know Sage is down, Experian and so forth down 30, 40, 50% over the last 6 months or so.
How can you justify holding on to those? What is the situation you're approaching? How you approaching the investment potential in these companies that have seems to have fallen out of bed? Well, um, one one has to accept that, um, that there's volatility associated with an emergent new technology and I can understand why investors um, sentiment to the opportunities might wax and wayne.
But I think, you know, I think it's very very important I I think there are three things I I would say about all of these companies that we're we're invested in. Um that the first is that I mean in some cases we've owned these for 20 years or longer. Um you you you remarked in your introduction there's been a lot of uh change in technology over the last 100 years.
You know, there's been a lot of change in technology over the last 25 years. Actually, all of the companies that you've named have turned out to be beneficiaries of developments in digital technology over the last quarter of a century. Relax's business today is far bigger and far more profitable than it was in 2000.
And the reason it's a lot bigger and more profitable is because it's been able to exploit developments in digital technology to make its products and services even more valuable. So at least at one bedrock level we can say that these companies have successfully negotiated these sorts of shifts in the past.
I think the second thing to say is that the companies absolutely get this. Um, they understand that AI is potentially a disruptive technology to their franchises, but they also, and I think anybody who is willing to spend time on this, look at what the companies are saying, look at what the companies are doing.
They are utilizing artificial intelligence powered tools to make their businesses more relevant and more profitable for their customers today. And you look at Relex's business, Sage's business, you can see an acceleration in the number of customers that they're winning and in their growth rates because they are successfully taking advantage of of AI.
So I I I think that you know there is a fine balance here. um pessimism about these businesses could very very suddenly turn into euphoria. I rather hope that it does because we would like the share prices uh to recover. But I I don't think I I I struggle to see today any clearcut definitive argument that says these companies are no longer relevant or will no longer be relevant to their customers.
Quite quite quite the contrary. It's interesting actually looking down the list of these businesses. Um you you you mentioned uh we mentioned Relics and Experian and so forth and there's other companies as the London Stock Exchange, Auto Trader and Right Move. Are they all on the same level if you see what I mean in terms of how they're going to be able to utilize AI?
What's the dynamic going on that connects all those companies? Yeah. the the the dynamic is that um they're all digital businesses a and have made tremendous successes of their position as digital businesses. Um, at the heart of all of them is data and constantly growing data and the companies have utilized developments in search engines, developments in technology to derive more and more insights um out of that data and hence utility to their customers.
I mean, Experian um [snorts] it's a credit rating um bureau very very um deeply deeply embedded in the workflows of its customers. Experian has also over the last five years built up a um a 200 million plus um number of individuals, people around the world who voluntarily signed up to Experian and are willing to share their personal financial data with Experian.
there there isn't another data asset relative to individuals like that anywhere in the world. There's no way that an LLM could scrape that data. Xperion has launched its own AI co-pilot, EVA it's called, which is helping those 200 million plus individuals make better financial decisions for themselves and their families.
That is a new growth opportunity for that company derived from its multi-deade success of building up these data assets that well we hope will drive significant profit growth going ahead. So you mentioned a couple of big ones there. Are you buying any of those at the moment with those declines in shares as I said over the last six months between 30 40 50%.
Is there an opportunity out there to get in now? I I I I I think I think a once- in a generation opportunity is being presented to to to access those companies that turn out to be beneficiaries of AI. Absolutely. And I don't know that all of the ones we're invested in will certainly be successful, but I think enough of them will be for us to I sincerely hope uh create a lot of additional wealth for investors in in Finsbury.
Yeah, I think you know there's there's such you know it's important to say this you know the the UK stock market um you know it has been a dull stock market um lots of substantial companies their share prices aren't very much higher than they were 10 20 years ago but you know I remember buying Rex at3 pounds a share in 2003 three.
It got to £40. Okay. Now, you're right. It's sold off. You You can buy it now at £22, but this is a business that has created extraordinary growth and wealth for its owners. Um London Stock Exchange Group listed at what was it two pounds a share I think in 2002. We were buying it then. That went up to £120.
Okay, it's back to 75. That's that's a hit. But people shouldn't lose sight of the fact that again just to repeat people think about tech think people think about data and they think about NASDAQ. They think about the United States and understandably because that's where the biggest and most of the companies are.
I'm just saying in fact in London there are a number of businesses that have truly worldclass data sets at least as good if not better than their US peers and maybe that's an opportunity for a UK investor if you don't want to buy BP or British American tobacco. Do you know what I mean? Yeah. Yeah. Let's move on to the other area we spoke about briefly consumer companies.
Um, Digio, nice well spread company across the sector. Burberry I think is also in your portfolio, isn't it? Um, what is it about those that that encourage you and how attached to AI are those sort of companies within the portfolio? Well, you know, there's a there's a clear uh bifocation in markets right now, which is on the one hand everything that could be impacted by AI um and people's um apprehension of that opportunity or threat is changing and we'll see.
But then there's another set of of of companies where you say well these assets AI isn't relevant for these assets. Um Guinness or Johnny Walker are not beneficiaries of but equally they're not threatened by AI. Um, the question to ask is, will people still be buying Burberry trench coats in 25 years time?
Will people still be drinking Tankare and Johnny Walker Black? Um, will Guinness be able to sustain the uh, extraordinary growth rate that it's delivered over the the last few years? And I think just going back, I don't know how coherent I was to those introductory comments, um, if you look over the last decade or two, technology has created wealth and that that new wealth has been spent on premium luxury heritage rich products.
And again within the context of the United Kingdom stock market, which is where I have to pick securities, there is no other Burberry. Burberry is the only London listed kind of British heritage luxury goods business. And that outerwear franchise, the trench coats, the scarves, that that is a serious global franchise.
They are the leading outear franchise globally. That's a very very important and highly durable market position. Again, what is it? One in every three bottles of scotch sold in the world is distilled by Diagio. Now, demand for scotch goes up and down and there's been a tough time recently, but it doesn't take away from the formidable nature of that franchise.
Sometimes, you know, investment's difficult. Sometimes the most important thing is, is this asset or franchise that you've invested in, how likely is it to remain relevant over the next 10 or 20 years? And I certainly think that Burberry's franchise, Diego's franchise, and let me say, I think right moves franchise.
I think that Rlex's position in global scientific publishing, I mean, Elsa has been a scientific publisher since the 17th century. You know, that really is a very very long tale asset. Um, the these are likely to these are likely to both survive and thrive and yeah, that ought to be the basis for satisfactory investment returns.
Let's look at um another um side effect of share prices as where they are is that we've seen buybacks taken decisions to buy back shares decisions by by boards. Is that something you applaud? Um when shares do drop like this, it can be seen as an appealing way to shore up the share price. But at the same count, if there's an opportunity here to grow, shouldn't they then be using the money to grow the business or reward dividends investors through dividends?
What's your view on buybacks? Well, we are invested in what we believe to be growth companies and the single most important thing therefore for these companies is to reinvest their precious retained earnings. They're all very cash generative by the way. The first thing, the biggest priority is to invest in the new opportunities that are being presented by developments in in technology.
And I just can't reinforce how persistent we are with that message with the companies. We we're privileged to have access to the executives of these companies. The number one thing for Eric Angstrom at Relics or Brian Cassen at Experian is please, please, please invest enough to ensure that Relics and Experian are fully taking advantage of these opportunities.
Now, um, you remarked a fortnight ago, Experian share price had a big one-day drop and the next day, Experian's board announced that they were initiating a billion dollar share buyback in part in response to that share price fall. And I think that that is a reasonable thing for the company to do if the company truly is convinced that investors are panicking in an untoward way and that um by retiring shares at an illogically low price, they enhance the value of those shares that aren't sold back to them.
So I I I think companies should be careful with buybacks. I think buybacks should be a lower priority than investing for organic growth. But if you have invested every dollar that you need to to grow the business, you've still got surplus capital and you sincerely believe that your share price is too low.
Then a buyback from our point of view is a rational thing to do. From a portfolio management position, how do you feel about um the the the current u rate of growth in the country? I mean, you talk about UK shares. We're under the um uh watchful eye of a government at the moment that wants to see uh more taxation for individuals as well as companies.
How do you approach fund management in that environment? Um we're talking at a time when we've just had a lot of pressure built upon the prime minister Kama about his position. He survived. We don't know where things are going. What is your longerterm thesis about how you go about investing in that situation?
Well, I I I think a start point is to acknowledge that the the the UK economy and the London stock market are not an identity. the the the um for for for historic reasons and I think because of the successful entrepreneurship of British businesses over decades if not centuries that the UK stock market is one of the most globally oriented stock markets
in the world and you know just when we talk about Experian or talk about relics it's important to note that The United States is by a very considerable margin their biggest economies. The the UK is not irrelevant, but these are truly global businesses that happen to be listed on the London stock market.
So, in a sense, trading global businesses on domestic politics doesn't really make that much sense. I think it's also demonstrable over time that when you look at the ups and downs of the stock market and try and track that to politics, it's very very hard to draw repeatable correlations. You know, the stock market has done well under conservative governments.
It's done poorly under conservative governments. The stock market has at times done very very well under labor administrations. I that's not to say that I what's going to happen now, but it is to say that I think it's dangerous as an investor in companies to spend too much time ftting about uh political vagaries.
um if you own the right businesses, you're going to be fine. And that's that's what you should focus on. How often do you take a look at the portfolio and and hoof out some companies that aren't performing and and invest in other areas? Is there much churn going on? I I feel that that I we have been hyperactive over the last two or three years.
um we've maybe introduced four or five new holdings since 2021 or 2022. Um now for most people that will sound like almost no activity but but actually you know dur during one of the strongest phases of Finsbur's performance um let's say I don't know roughly between 2010 and 2017 I think we added one new holding in a seven-year period.
Um so again don't as investors, private investors or watching other investors don't confuse portfolio activity necessarily with superior investment returns. Sometimes just hanging on to what you own, if the reasons for hanging on remain valid, that's just as likely to generate superior returns as chopping and changing.
Um, but just to be absolutely explicit about this because it is having currently an unhelpful impact on our portfolio. Over the last three or four years, we have looked to identify London listed companies that we believe are beneficiaries of AI. And that proposition is being tested right now as we've been discussing.
Um, but I've got to believe and I actually do believe that we've created exposure to a number of businesses with truly significant growth opportunities opening up for them and if that's right uh we're going to make a lot of money for our investors. So let's look out from where we are now over the next 5 to 10 years.
How do you see we've spoken a lot about AI clearly that's high in your mind in terms of opportunities there. Do you think that is going to be the driving factor? If so, how are you going to take advantage of that? Well, you know, analogies are dangerous. Um, but but I I I I think it it's a credible analogy to say that the internet, let's face it, AI is just the next iteration of the internet.
I mean, in many ways, it isn't even that revolutionary. It's just more powerful than what was available available before. A useful analogy is is is the railroads in in the 19th century. And you know essentially railroads went from being 0% of United States financial markets in 1830 as they were getting going to by I let's say 1900 railroads or associated industries were 80% of the value of the the US stock market.
It was a totally transformative technology. Railroads and the shape of the US stock market was utterly transformed. Um I I think we are in the process a similar process where technology businesses, data businesses, um companies exploiting technology change are likely to be a bigger and bigger proportion of stock markets over time.
And that presents challenges because technology can be disruptive. Um technology leaders have an unnerving um uh unnerving habit of losing their technology leadership. But I think as I said I started off by saying that I was a congenital optimist and what makes sense to me is to look at companies available in the UK stock market, the London stock market from that perspective that technology is going to get more important and it's going to create wealth.
Um let let's see what ideas we can find from that. Yeah, look Nick, we'll leave it there but thanks indeed for joining us. It's been a pleasure catching up with you. Thank you, Jeremy. Thank you very much indeed. That's Nick Train. He is the portfolio manager of the Finsbury Growth and Income Trust.
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