Two Lindsell Train funds were among the most sold by investors in January as the fallout from a ratings downgrade continues.

Around £225m was pulled in January from LF Lindsell Train Global Equity (B3NS4D2) and LF Lindsell Train UK Equity (B18B9X7), according to estimates by Morningstar.

This followed the financial information provider’s decision to downgrade the UK equity fund the previous month from ‘gold’ to ‘bronze’ over liquidity concerns.

However, most of the outflows, around £162m, came from the global equity fund, which wasn’t directly affected by the downgrade.

Both funds were in the top three most sold by AJ Bell Youinvest customers over the past month.

In its decision to downgrade the UK equity fund in December, Morningstar also highlighted concerns that the highly concentrated approach taken by Lindsell Train – the number of stocks ranges from 20 to 30 in both funds – can make it ‘vulnerable to any change in fortune’ in the companies it owns.

Both the UK and global funds have struggled performance-wise in the past few months, with concerns over growth rates at a number of stocks which make up the top 10 holdings of both portfolios.

Two of the biggest holdings in both funds are consumer goods giant Unilever (ULVR) and alcoholic drinks maker Diageo (DGE), which have struggled with slowing growth in sales and seen their share prices fall accordingly.

While Lindsell Train UK Equity beat its FTSE All Share benchmark by 3.6% in 2019, the global equity fund lagged 3.3% behind its MSCI World benchmark.

Though investors are always encouraged to look long-term, both funds also significantly lagged their benchmarks in the last three months of 2019, dented by double-digit drops in the Unilever and Diageo share prices.

But speaking on Shares’ Money & Markets podcast, Nick Train remained bullish on the prospects for both companies.

Well known as a buy and hold investor, he reminded investors to look at the ‘absolutely fantastic’ multi-decade share price charts for
both businesses.

Train said: ‘I don’t see any fundamental deterioration in the strategic argument for a Unilever or Diageo.

‘Growth rates can be a little volatile, but one of the things that really strikes us about markets, the world we’re living in today, is that there ain’t any inflation.

‘Tech is whipping away pricing power for so many industries. So if Unilever’s growth rate goes from 3.5% per annum to 3%, which is what people are complaining about at this most recent period, maybe that’s still accelerating real growth, because inflation is so low.

‘Maybe a decade ago Unilever was growing at 7%, maybe 4% to 5% of that was inflation, which isn’t as valuable. So I don’t think the real growth rates of these businesses that own truly resonant global consumer brands have actually slowed, if anything they’ve picked up.’

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