Nick Train’s Finsbury Growth & Income Trust (FGT) suffered a 14.4% decline in H1 net asset value (NAV) total return after key holdings plunged on AI disruption concerns.
Finsbury Growth & Income’s negative share price total return of 14.1% lagged the 8.9% rise in the FTSE All Share Index. But chairman Pars Purewal has pledged to do ‘whatever it takes’ to improve shareholder returns.
Three key measures
Purewal conceded Finsbury Growth & Income’s recent performance has been ‘disappointing’. Nevertheless, he continues to back Train’s ‘disciplined, long-term approach focused on high quality businesses with resilient franchises and hard-to-replicate data assets, where we believe AI will prove an enhancer of value rather than a threat’.
In response to the trust’s lacklustre performance, the board has adopted an enhanced dividend policy effective from October 2026. Under this policy, the annual dividend will increase by ‘at least 50%’ from approximately 20p to 30p per share. This will raise the current yield on the trust from around 2.6% to 3.9%.
The fund will also move from semi-annual dividends to quarterly payouts in line with most UK Equity Income sector competitors.
Finsbury Growth & Income is also abandoning its policy of using only modest gearing to boost shareholder returns to offset the risk of Train’s highly-concentrated portfolio.
In future, the trust aims to ‘full deploy’ its £100 million borrowing facility. Currently, just £29.2 million is drawn. The change reflects the board’s view that current UK equity market valuations are ‘particularly attractive’.
The chairman also pointed to the trust’s reduced management fees, which delivered a quick-fire cost saving of £129,000 in the three months to March 2026.
Poised for re-rating
Purewal expressed support for Train, pointing to the more than 97% support Finsbury Growth & Income received in its first shareholder continuation vote in January.
However, he held out the prospect of a further continuation vote if performance remains challenging. Purewal said the board would do ‘whatever it takes’ to improve returns.
Train reiterated that Finsbury Growth & Income holds ‘a collection of outstanding, in most cases world-class, UK-listed companies’ that have fallen out of favour with investors.
‘In particular, we believe that the sell-off in London-listed data, software and platform companies could offer a once-in-a decade opportunity to access exceptional growth assets at fundamentally the wrong price.’
The buy-and-hold investor added: ‘This really should be an opportunity to utilise the special powers of an investment trust to create additional value for its shareholders.’
Unique exposure
Train said the biggest performance detractor over H1 was the sell-off in data, software and platform companies.
Casualties included portfolio constituents Experian (LON:EXPN), LSEG (LON:LSGE) and RELX (LON:REL). Other fallers were Rightmove (LON:RMV), Autotrader (LON:AUTO) and Sage (LON:SGE). ‘The reason is investor concerns that AI will hurt these currently highly successful businesses,’ explained Train.
‘Our view is diametrically opposed. In our opinion these companies are much more likely to be beneficiaries from AI than victims of it. This is such an important proposition and, if it is correct, offers FGT’s shareholders an almost unique exposure to a growth theme of global significance.’
Turning to consumer brands, Train admitted holding Burberry (LON:BRBY) and Diageo (LON:DGE) through their respective bear markets has tested investors’ patience.
‘Nonetheless, we still believe the Burberry brand and the best of Diageo’s brands retain their global relevance’, said Train. The Warren Buffett disciple believes both will ‘resume their long-term growth trajectories once consumer confidence improves. As a result, we view both share prices as meaningfully undervalued today.’
Finsbury Growth & Income has underperformed the FTSE All Share over the one, three and five years. Exposure to data companies and consumer brands detracted over H1. So too did a lack of exposure to banks, energy and miners.
We are encouraged to see the board backing Train and making better use of the advantages of the investment trust structure. The enhanced dividend will increase the trust’s yield to be in line with the peer group weighted average.
Increasing leverage could also pay off, if Train’s thesis on data and software companies proves correct. However, investors should note this also increases the risk profile of an already super-concentrated portfolio.
Learn more about Finsbury Growth & Income Trust here: https://www.finsburygt.com/
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