Star investor Nick Train has made an estimated £18m in dividends, despite failing to match the returns of basic savings accounts.
Mr Train and his business partner Michael Lindsell, together with their spouses, split an estimated £35.5m in the year to January 2023, according to Companies House filings for their firm Lindsell Train.
Savers have £8bn invested in Mr Train’s most popular funds, which charge around 0.6pc in management fees per year.
However, the funds have failed to keep up with the stock markets against which it measures its performance.
The flagship Lindsell Train Global Equity fund delivered returns of just 2pc in the year ended January 2023, compared with a 7pc rise in global stock markets. Savers can now achieve more than double the return achieved by Mr Train last year investing in a basic savings account, thanks to increases in central interest rates.
Meanwhile Mr Train’s UK Equity fund rose by 9pc, compared with a 13pc rise in the FTSE 100.
The bumper payout follows a difficult year for the company, which recorded a 17pc slump in operating profit to £66.7m. It blamed the fall on a period of sustained net outflows from the fund, which it said was primarily in response to “recent relative investment under-performance over the last three years”.
It is in stark contrast to the lauded manager’s impressive longer-term performance, which helped him rise to prominence alongside other well-known stock pickers including Terry Smith.
Mr Train has built a reputation in the City for his “quality” investment strategy, backing only a small number of companies with unique brands and loyal followings, such as Diageo, PepsiCo and Nintendo, holding them over very long terms.
It is a similar investment approach championed by the eminent American investor Warren Buffet. However, Mr Train has largely shunned the American technology giants that have driven stock market returns for much of the past decade.
James Bullock, who co-manages Lindsell Train Global Equity with Mr Train and Mr Lindsell, wrote this month that the fund’s performance was “again disappointing” in August. Shares in Diageo, the drinks manufacturer which accounts for around 8pc of the fund’s total portfolio, have dropped by 14pc in the year to date.
Robin Powell, of the Evidence-Based Investor blog, said such large dividend payouts showed there was “no sector quite like active fund management when it comes to rewarding failure.”
He said: “Nick Train may have outperformed for reasonable periods in the past but he has consistently lagged the market in recent years.
“His recent performance over the past 12 months has been especially poor. For a fund manager who can’t beat a tracker to be paid millions of pounds a year is frankly obscene, and yet it happens all the time.
“The interests of fund managers and the investors they’re supposed to serve are completely misaligned.”
It comes as DIY investors increasingly turn away from star investors and plough into cheaper tracker funds. Rather than trying to beat the market, these funds instead mimic the performance of market indices.
Last year, only 27pc of professional stock pickers beat the market, according to research from the broker AJ Bell. This was even lower among those specialising in British stocks, with just 13pc beating the FTSE 100, it said. In the past decade, overall 38pc of active fund managers beat their passive alternative.
At Hargreaves Lansdown, Britain’s largest broker, eight of the top 10 most popular funds are now passive index funds. At rivals AJ Bell and Interactive Investor, nine of the top 10 are passive.
Mr Train declined to comment.
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