Lindsell Train defends approach to risk management after Hargreaves criticism

Lindsell Train has defended its approach to risk management after Hargreaves Lansdown criticised the level of oversight at the firm.

In a note to investors last week, the investment platform said ongoing analysis had highlighted some concerns, which it had brought up with Lindsell Train.

A spokesperson for Lindsell Train told This Is Money the firm had a ‘clearly defined and disciplined investment approach… invest[ing] in what we believe to be high quality companies’.

Hargreaves Lansdown has taken aim at Lindsell Train’s approach to risk management in a note to investors

Among these companies is Hargreaves Lansdown itself. Lindsell Train is the investment platform’s second biggest shareholder, holding a stake of around 12 per cent.

Chief among its concerns were that Lindsell Train, which was founded and is still run by Michael Lindsell and Nick Train, does not have a sufficient risk management framework in place and managers are not being challenged enough.

Emma Wall, Hargreaves Lansdown’s head of investment analysis and research said: ‘Following a period of engagement with the team at Lindsell Train, we do not feel that the pace of progress has been satisfactory.

‘At present, we don’t feel that the investment risk framework currently in place is sufficiently robust, nor that Lindsell Train have the correct capabilities, to provide strong independent oversight and challenge of the investment team.’

The investment platform emphasised its analysis was ‘not a judgment on the investment capabilities of the fund managers… [who] are patient, long-term investors and have established a repeatable investment process across the funds they manage, hunting for high quality companies.’

Wall acknowledged the approach taken by Train, Lindsell and portfolio manager James Bullock ‘has served investors very well over the long term.’

The Lindsell Train Global Equity fund has largely outperformed the IA Global sector over the last five years. Between April 2022 and April 2023, the fund delivered growth of 8.75 per cent while the IA Global sector lagged behind at 0.56 per cent.

Similarly, the Lindsell Train UK Equity fund reported a 9.71 per cent return, beating both the FTSE All Share, which delivered a 6.04 per cent return, and the IA UK All Companies at 1.62 per cent.

The Lindsell Train spokesperson said that the firm’s ‘primary aim is to avoid losing permanent capital value’ for investors and this can be best mitigated by investing in high quality companies.

The firm noted its Global, UK, Japanese and North American Equity funds invest only in listed companies and have no exposure to unlisted securities.

This post first appeared on Dailymail.co.uk