Following a period of significant underperformance, Nick Train, manager of the £2.1bn Finsbury Growth & Income trust, has explained his investment rationale for each of the 17 stocks that make up 98% of the portfolio in a lengthy statement in the annual report released today (15 December).

The company's net asset value per share total return was 10.6%, for the year to the end of September, while the share price total return was 6.3%. The annual report acknowledged this was "disappointing" compared to the benchmark, the FTSE All Share index, which returned 27.9% over the same period.

Explaining the underperformance Train highlighted that the portfolio is "risky". "We have no quibble with any rejoinder that what we do is risky," he said.

This risk is two-fold, according to the manager. The trust is at risk of underperforming its benchmark and "in the sense that holding such big positions exposes shareholders to the risk of outsize capital losses if something existentially bad befalls any of the companies," Train explained.

However, he said this concentration is "deliberate" and gives him "the best chance of delivering returns".

So in order to set his investors' minds at ease he outlined the investment case for all 17 stocks, which are: Diageo; RELX; LSE; Unilever; Mondelez; Schroders; Burberry; Sage; Hargreaves Lansdowne; Remy Cointreau/Heineken; Experian; Daily Mail & General Trust; Fever Tree; Manchester United; Rathbones and A.G. Barr.

In the investment cases Train defended some of the detractors from his portfolio, such as Unilever. Of the company he said: "It is undeniable that of all the consumer brand companies we own in the company, Unilever is the one most at risk of a loss of pricing power across its product portfolio."

However, he remains invested because he believes in the evolution of the company and that "the current pessimism about Unilever is excessive".

The trust is trading on a 4.8% discount, according to figures from the Association of Investment Companies.

The chair of the trust, Simon Hayes, said: "Despite the recent underperformance, under Nick Train's management the company has performed strongly against its benchmark in 16 of the 20 years and has continued to outperform over the last three, five and ten years.

"The return over the year under review reflects relative underperformance in a period in which the market has rewarded companies with prospects for rapid recovery from the effects of the pandemic as opposed to those businesses which we own: businesses that offer consistent growth."

Mick Gilligan, head of managed portfolio services of Killik said long-term investors who are considering adding some of the trust to their portfolio can at least expect "ongoing support from the board to buy back stock around current levels and help to ensure the discount does not drift much wider than 5%".