Activist investors don’t know how to run a big firm, fund king warns
THE army of activist investors laying siege to some of Britain’s biggest firms are underestimating bosses, according to one of the City’s most influential money managers.
Fund star Nick Train, who manages Lindsell Train and Finsbury Growth & Income Trust, warned that even many major investors don’t have the ‘faintest idea’ how to run a multinational so should be cautious about dispensing advice.
A dozen FTSE100 groups worth almost £500billion in total have been targeted by agitators – including telecoms giant Vodafone, consumer goods maker Unilever and pharma firm GlaxoSmithKline.
But City veteran Train – who has a fiercely loyal following of small investors – swept aside the activists’ concerns and said shareholders should focus on the long term.
Speaking on the sidelines of the Finsbury annual meeting, he told The Mail on Sunday: ‘I worry that many people like me actually haven’t the faintest idea how to run a company of the scale and complexity of a Vodafone or Unilever.
‘It’s very easy for people sitting looking at a Bloomberg screen, who can buy and sell a billion pounds of the company, to say, “Oh, you just need to press a button”. Running businesses – I know enough about it to know – it’s not as easy as that.’
However, he added that it could be a ‘healthy thing’ for some companies and investment trust managers to be challenged by activists or bids from private equity firms.
‘Nature abhors a vacuum and when corporate assets are run in a mediocre way or [share] prices fall to clearly attractively low prices there will be a mechanism whereby that value can be realised,’ Train said.
At the event, held in the City’s grand Guildhall, Train admitted that Finsbury had underperformed its benchmark. The fund’s performance was hindered by struggles at key holdings including the London Stock Exchange Group, online stockbroker Hargreaves Lansdown and Unilever.
He took the opportunity to reiterate his support for Unilever chief executive Alan Jope, who is facing pressure from activist Nelson Peltz after a failed £50billion attempt to buy GlaxoSmithKline’s consumer goods arm. Train, whose fund owns a £1.24billion stake in Unilever, said the deal was a ‘rational’ move, but that the timing was ‘unfortunate’ after two Covid-hit years.
He added: ‘I suspect that investors would have applauded it to the rafters [two years ago]. Now the thing is held in derision. It’s a bit unfair, frankly.’
In a warning to Peltz, Train said: ‘This is a business that for half a century or more has generated reliable growing dividends and returns for its owners, and provided a secure, relatively risk-free investment for widows and orphans.
‘Investors have to be careful about allowing or condoning any smashing up of a corporate asset that has achieved something like that. It has been a magnificent business.’
Train revealed that investors drawing cash out of the fund had forced him to sell his stake in the education group Pearson, which is also under attack from an activist, Cevian Capital.
However, the investment guru has backed Hargreaves Lansdown to grow market share this year, and said he had beefed up its stake in the London Stock Exchange Group due to confidence in its £20billion takeover of data firm Refinitiv.