Nick Train closes his eyes and nods slowly as he considers his response to a question I\u2019ve been putting off for about an hour: does he think it\u2019s time to quit?<\/p>\n
Train was once feted as Britain\u2019s answer to Warren Buffett, but the stockpicker\u2019s 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\u2019s artificial intelligence giants.\u00a0<\/p>\n
Britain\u2019s 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\u2019 fortunes.<\/p>\n
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.<\/p>\n
\u201cFrom my perspective, and sorry if it sounds trite, but it has been the privilege of my career to manage Finsbury. I\u2019ve dedicated so much energy \u2014 intellectual energy and emotion \u2014 to this and it\u2019s a really important part of my life. It\u2019s 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,\u201d he says.<\/p>\n
Train notes the old saying that every political career ends in failure, adding: \u201cSo 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\u2019m not proposing to walk away.\u201d<\/p>\n
The 67-year-old\u2019s 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. <\/p>\n
The Finsbury trust\u2019s exposure to the recent stocks sell-off sparked by AI is substantial because LSEG, Experian, Sage, Relx and Rightmove are all among trust\u2019s 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 \u201chorrible over the last nine months but we still own them\u201d.<\/p>\n
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 \u201ca bit flaccid\u201d. As we tuck in, he sets out his stall, saying he wants to be \u201cas clear and persuasive\u201d as possible about the opportunities he sees for his investors. <\/p>\n
He says: \u201cAI 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.<\/p>\n
\u201cI 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\u2019t relevant. But I remember a lot of UK professional fund managers who just didn\u2019t 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.\u201d<\/p>\n
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 \u201cchange the scale of the opportunity\u201d available to the London-listed data group. The stockpicker says that LSEG\u2019s under-pressure shares could not only recover to their previous high of \u00a3120, but may well double from there to \u00a3240. 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.<\/p>\n
Train says: \u201cA 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.<\/p>\n
\u201cI can\u2019t 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.\u201d<\/p>\n