Nick Train closes his eyes and nods slowly as he considers his response to a question I’ve been putting off for about an hour: does he think it’s time to quit?
Train was once feted as Britain’s answer to Warren Buffett, but the stockpicker’s star quality has faded in more recent times after his twenty-year run of outperformance went into reverse. His buy-and-hold investment thesis has come unstuck as the difficulties in his portfolio spread from one bet to another. The blight started with Cazoo and Fever Tree, before shifting to Diageo, and it is now affecting his data, publishing and software investments, which are being demolished by America’s artificial intelligence giants.
Britain’s investment community remains fond of the Oxford-educated fund manager for his thoughtful, sincere approach to investing, and his dutiful attitude to his investors. However, his Lindsell Train funds have faced billions in outflows over the last five years, and the Finsbury Growth and Income Trust he manages ranks as one of the worst-performing among UK equity income trusts. Train won a stay of execution at a Finsbury shareholder vote in January, but there remains a question mark over how long he can personally endure the implosion of the funds’ fortunes.
Train emerges from a moment of introspection to respond to my question with a carefully-considered statement, delivered in his characteristically emphatic and deliberate style.
“From my perspective, and sorry if it sounds trite, but it has been the privilege of my career to manage Finsbury. I’ve dedicated so much energy — intellectual energy and emotion — to this and it’s a really important part of my life. It’s also a very big asset for my family as I have personally invested. So, it would take a lot to dislodge me from my commitment to do the best I possibly can,” he says.
Train notes the old saying that every political career ends in failure, adding: “So I would never, ever want anyone to take an emotional position about whether we should still be responsible for the fund. The moment at which confidence has gone, then I should leave. But I’m not proposing to walk away.”
The 67-year-old’s commitment to Finsbury mirrors his approach to his investments more broadly. Over lunch at Chez Antoinette, a French diner in Victoria, it becomes clear he is here to explain why he is sticking with his data and software investments.
The Finsbury trust’s exposure to the recent stocks sell-off sparked by AI is substantial because LSEG, Experian, Sage, Relx and Rightmove are all among trust’s top 10 largest holdings, representing a combined 49 per cent of its total investments at the end of March. Train says that their performance has been “horrible over the last nine months but we still own them”.
For our starter, we both opt for the white asparagus seasoned with truffle, which is prepared al dente. Train expresses his approval, having been so often disappointed by white asparagus that is served up “a bit flaccid”. As we tuck in, he sets out his stall, saying he wants to be “as clear and persuasive” as possible about the opportunities he sees for his investors.
He says: “AI feels simultaneously to me like one of the biggest investment opportunities I have ever seen in many, many decades of experience. And yet at the same time, it terrifies me because I can see the potential for it to destroy value in long-established businesses as well.
“I have some sympathy with the view that the impact is all too difficult to predict, and that the safest thing might be to hide in industry segments where AI just isn’t relevant. But I remember a lot of UK professional fund managers who just didn’t want to deal with what the internet might mean in 1997 to 2004. By ignoring it, and not participating, they might have found a degree of safety for a period of time, but they may also have missed out on a once-in-a-generation opportunity to make fabulous returns for their investors.”
For Train, the potential for big returns from AI lies in the stocks that are being most severely punished at the moment. He picks out LSEG as an example and says it will benefit from machine learning models because they “change the scale of the opportunity” available to the London-listed data group. The stockpicker says that LSEG’s under-pressure shares could not only recover to their previous high of £120, but may well double from there to £240. He points out that LSEG captures more than 15 million price signals a second from hundreds of trading venues around the world, and that these data points are a vital resource for tools such as Claude, the software created by Anthropic, the AI developer.
Train says: “A fellow investor said to me: the single most valuable thing in the AI universe today is constantly replenishing business data that other people cannot access. If you have data that is always current, then you have got something to set AI tools loose on to create new insights that other people simply cannot.
“I can’t remember a time when so many big holdings in my portfolio seemed to have on the one hand such a huge potential upside, but at the same time smart investors, people I admire, are saying these businesses are potentially fundamentally challenged, and they want to sell them now. That is a difficult set of circumstances.”
Train has chosen the fish of the day for his main course, and I have ordered a bavette steak with chips. Having run through the perils in his portfolio, I am curious to know: how does he cope with the pressure of the daily, often disappointing, evaluations that come alongside investing in UK equities?
“Yogic breathing,” he says.
“Seriously, I am actually a yoga teacher, and part of my learning, and training, is that I regularly practice what is called pranayama, or yoga breathing techniques. In times of stress, it’s very, very helpful. Advanced practitioners can meditate on nothing, but I can’t meditate on nothing; I have to have a single point of focus in a meditation, so I don’t feel as though my mind is wandering. And, as you know, in yoga science, what you are instructed to focus on is the breathing.”
The stockpicker also escapes the pressures of fund management on long, multi-day walking routes through the countryside, and is particularly proud of completing the “big daddy” of long-distance paths last year when he traversed the Pennine Way, a multi-week trail through northern England, ending in a village just over the Scottish border. He tells me that as a birthday treat this month, he will take on the Cotswold Way, a “much less challenging” footpath from Bath to Chipping Campden in Gloucestershire.
As far as his working life is concerned, Train says his favourite part is “when share prices go up”. Hopefully, his data stocks will be able to provide a bit more sparkle for his day job when he returns from wandering the sunny Cotswolds countryside.
CV
Education: Degree in Modern History from the University of Oxford
Career: Spent 17 years at GT Management, a City fund manager, building up a track record in UK and global equities before eventually becoming chief investment officer for Europe. He joined M&G Investment Management in 1998 as a director and became head of global equities. He co-founded Lindsell Train Limited in 2000 with Michael Lindsell and is the firm’s chairman.
Family: Lives in London with Liz, his wife. They have three children.
Receipt
Chez Antoinette Victoria, 22 Palmer St, London SW1H 0PH
2x white asparagus with truffle £24
1x bavette steak and chips £24
1x fish of the day £23.50
1x chips £6.00
2x Fentimans lemonade £9.80
1x Moroccan mint tea £3.70
1x double espresso £3.20
12.50 per cent service charge £11.77
Total: £105.97