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The UK’s most prominent “star” stockpickers delivered lower returns than cash last year, as many active fund managers struggled to compete with passive index trackers and the rise of US technology stocks.
Nick Train, who manages the £1bn Finsbury Growth and Income Trust, suffered a difficult year in which the trust’s net asset value fell 7.5 per cent to the end of November, according to the latest factsheet.
Train’s £1.5bn Lindsell Train UK Equity Fund fell 7.2 per cent over this period, underperforming the FTSE All-Share index, which returned 21.4 per cent.
Shareholders in his trust will vote next week over whether to replace him as manager, the first such vote in its 100-year history.
Terry Smith, another of the UK’s best-known fund managers, said in a letter to shareholders this week that his flagship Fundsmith Equity fund returned 0.8 per cent in 2025 — less than the return on cash of 4.2 per cent.
Both fund managers have stood out over the years for delivering strong longer-term results by focusing on so-called quality stocks that show signs of promising growth prospects.
Train’s UK Equity fund has returned 8.6 per cent a year on average since it launched in 2006, while Smith’s has provided 13.8 per cent since its launch in 2010.
“It’s been a tough period for the UK’s most prominent managers, and the two that are regularly mentioned are Nick Train and Terry Smith, both of whom have endured quite a long run of underperformance,” said Jason Hollands of wealth manager Evelyn Partners.
“That has tested patience, although both have over the longer run added a lot of value for their investors, especially if you’ve been with them since the inception of their lead funds.”
Smith said in his annual letter to shareholders that the surge of money into index-tracking funds and the dominance of the US technology stocks had weighed on his fund, which only holds three of the big tech players — Meta, Microsoft and Apple.
Train said: “We remain convinced that the investment opportunity we have captured in the portfolio offers significant upside, as well as being highly differentiated.
“Contrary to common perceptions, we believe the UK is home to many genuinely world class global growth businesses, capable of delivering multi‑decade growth in earnings and dividends to their shareholders.”
But the underperformance has put the spotlight on fees and has raised questions over whether the era of the star fund manager is over.
Train’s UK Equity fund has an ongoing charge, or management fee, of 0.67 per cent, while Smith’s charge is 1.04 per cent. By comparison, the cheapest trackers following the MSCI World index and FTSE All-Share index charge less than 0.1 per cent.
“The era of the star manager has been on the wane for some time and reputationally a huge blow was the whole Woodford debacle,” said Hollands, referring to the closure of former fund manager Neil Woodford’s £3.7bn Equity Income fund which led to thousands of investors nursing losses.
Marcus Blyth, of wealth manager Rathbones, said: “The label of a star fund manager is achieved after a period of excellent performance, where essentially the stars have aligned for the investment process the fund manager applies and the stocks they select.
“Post the global financial crisis, growth investing was in the ascendancy and this provided an environment that flattered many fund managers. They simply could do no wrong.
“Then 2022 hit and it provided a humbling experience for many. Since then, a resurgence in value stocks, higher interest rates and momentum in a small subset of AI related companies have left many of these ‘star managers’ significantly lagging and investors questioning their approach.”