This week Alastair Macdougall of NW Brown looks at Smithson investment trust, which recently broke the record for the largest initial public offer of an investment trust in the UK.
Stocks in Focus: Smithson Investment Trust
The trust was initially aiming to raise £250m in funding, but due to such high demand they increased the size of the offer to £600m. The final amount raised was £822.5m, taking the crown from Neil Woodford who set the previous record at £800m with his Woodford Patient Capital Trust in 2015.
The Smithson investment trust will be managed by Fundsmith, who currently manage around £18bn of assets. The majority (£16bn) of this is through the Fundsmith Equity fund, which has been a huge success since its launch in 2010 and is managed by the renowned Terry Smith.
This trust will adopt the same strategy as the Fundsmith Equity fund of “buy quality companies, don’t overpay and then do nothing”. However, this trust will target small and medium sized companies (between £500m and £15bn in value) from across the globe. The Fundsmith team believe there is significant opportunity for investors within this space, not just because of the long-term outperformance of smaller sized companies compared to their larger peers but also because there is greater opportunity for active management due to less coverage from research analysts.
The trust will be managed by Simon Barnard and Will Morgan, who both joined from Goldman Sachs, with Terry Smith providing advice and support. They are looking to build a portfolio of 25 to 40 high quality companies and hold these companies for the long-term.
The Fundsmith team have a strong reputation for identifying great investment opportunities and it is therefore no surprise this trust has seen high demand. However, we will have to wait and see if the different lead manager and focus will enjoy the same level of success.
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