Train won’t be derailed by interest rate changes, LSE bid

Nick Train, manager of the Finsbury Growth & Income investment trust, says his portfolio approach is not set to change as a result of recent interest rate movements in the UK.

The fund invests in a concentrated number of stocks, about 25-30, listed in the UK, but which consist generally of larger-sized companies with track records and which are seen to be undervalued in total returns terms over longer periods.

“I don’t care about short-term rates,” Train says.

The fund takes a strategic view of its holdings rather than aiming for a series of tactical changes, Train adds, besides which the MPC’s decision to get stuck into the rising rate of UK inflation is likely to produce benefits in the long term for a fund such as his.

For example, the move is seen as good for the long-term value of sterling-based assets, he says, even if in the short term further sharp rises in interest rates could hit banking and retail stocks.

A number of financial, consumer and cyclical stocks currently make up the top-10 list of holdings, including ordinary and preference shares in HBOS, Diageo, Wolverhampton & Dudley Breweries, Cadbury Schweppes and AG Barr (makers of the ubiquitous Irn-Bru soft drink)

Because the fund invests in companies with global operations, but which are listed primarily in the UK, the question of ownership of the London Stock Exchange is an important one.

Train says the performance of the LSE was stellar through 2006, and he believes if Nasdaq were to be successful in its bid as currently priced “it would be a steal”.

The strategic importance of the LSE as the global securities market moves towards 24/7 trading and global listings is enormous, Train says, however as a user of the LSE he does not expect any major upsets to the actual operations of the exchange regardless of any ownership struggle.

In terms of specific stocks with an interesting story to tell, Train believes the growing power of consumption in emerging markets will result in faster growth for companies traditionally seen as staid.

Unilever is one many have seen as a pure “dog” in the past decade, Train says, but recent figures from this company suggest its sales in emerging markets already outdo the total from Western Europe, and this is a trend set to continue over the next couple of decades. This is why the fund has taken a stake in the Anglo-Dutch multinational for the first time in a decade.

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