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Smithson: new Fundsmith Investment Trust to launch

Closed-end funds and OEICs
shawsdale
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Smithson: new Fundsmith Investment Trust to launch

#164049

Postby shawsdale » September 4th, 2018, 8:14 am

Terry Smith's comments at the Fundsmith AGM and recent article in the Financial Times on the virtues of smaller companies make sense now given this morning's stock exchange announcement of Fundsmith's intention to launch an up to £250m global small and mid cap investment trust called Smithson:

https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/other/13777483.html

Prospectus due 17th September, closing date 12th October, dealing to start 19th October.

Smithson won't be managed by Terry Smith himself, rather two ex-Goldman Sachs employees: Simon Barnard and Will Morgan. Although Terry Smith will have 'oversight' as well as £25m 'skin in the game' at launch.

I'd be interested in what others think, as well as perhaps general thoughts on whether geographical/sectoral specialisation is better than global generalism in this sphere.

I'm invested in Edinburgh Worldwide (EWI) and Shin Nippon (BGS) myself and regret not purchasing Standard Life Global Smaller Companies OEIC a while ago. Given the Fundsmith style I suspect its portfolio may be more akin to the Standard Life fund than the Baillie Gifford emphasis on technological innovation.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164081

Postby WorldCupWilly » September 4th, 2018, 9:56 am

Interesting, particularly if you read his article in last weekend's FT Money section -

https://www.fundsmith.co.uk/news/article/2018/08/31/financial-times---busting-the-myths-of-investment

My interpretation of this is that he's saying buy Fundsmith/FEET for your 65% lower risk Global exposure and Smithson for your 35% small cap edge.

I find Smith's arguments pretty compelling in terms of how he manages our money. To your point about geographical/sectoral v global generalism, I'd expect them to stick to many of his existing principles in stock selection and continue to avoid the "bad sectors" Aswath Damodaran identifies. I'm in BGS like you and have been happy with its performance but recognise that there is a concentration of currency risk in Japan. That said, Fundsmith has no Japan exposure to I've picked it for precisely that reason. I also think the Japan stocks have helped Lindsell Train Global Equity get the edge over Fundsmith recently.

WCW

Pendrainllwyn
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Re: Smithson: new Fundsmith Investment Trust to launch

#164137

Postby Pendrainllwyn » September 4th, 2018, 1:23 pm

The announcement states they will invest in companies with a market cap up to 15BN sterling and an average of 7BN. They will invest globally but for illustration, a quick look at the FTSE 100 suggests that excludes only roughly the largest 33 companies and the average holding is equivalent to the market cap of the roughly 33rd smallest company in the FTSE 100. It may turn out be a great fund and Terry certainly knows what he is doing but, if my quick glance is right, the fund doesn't appear to be excluding too many potential targets. More no doubt in the US. Personally if I was looking for exposure to "smaller" companies I would look for a fund looking a bit further down the market cap scale. I owe Terry a beer for enticing me to look at L'Oreal so I wish him well and will probably keep an eye out for what they purchase.

Pendrainllwyn

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Re: Smithson: new Fundsmith Investment Trust to launch

#164147

Postby Alaric » September 4th, 2018, 1:35 pm

FredBloggs wrote:I have no idea if Smithson IT will be available at launch with platforms such as II. There is no information on the II website at the present time.


II have participated in some of the recent IT issues and other IPOs. I formed the impression that IPOs were slightly more frequent than they had been in the TD Direct era.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164159

Postby Pendrainllwyn » September 4th, 2018, 2:10 pm

Sounds like it could be a good fit for you Fred. I know you are a Terry fan. It was you who put me onto him in the first place. Having some money in non sterling assets may not be a bad call either at this time. Best of luck with it.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164206

Postby xeny » September 4th, 2018, 4:11 pm

WorldCupWilly wrote:Interesting, particularly if you read his article in last weekend's FT Money section -

https://www.fundsmith.co.uk/news/article/2018/08/31/financial-times---busting-the-myths-of-investment

My interpretation of this is that he's saying buy Fundsmith/FEET for your 65% lower risk Global exposure and Smithson for your 35% small cap edge.



That's my interpretation as well, although I'll probably hold rather less than 35% Smithson, more for the less risk than the better performance.

I mentioned on another thread that there's a PDF with minutely more information at http://smithson.co.uk

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Re: Smithson: new Fundsmith Investment Trust to launch

#164240

Postby Avantegarde » September 4th, 2018, 5:28 pm

This is the public announcement: https://smithson.co.uk/

Mr Smith makes it sound like he is onto a winner, which may be true.

By contrast, the huge F&C Global Smaller Companies IT has costs of 1.15% (according to its key information document) and has returned 94% in the past five years: https://www.theaic.co.uk/companydata/237

And the Vanguard Global Small-Cap index tracker has returned 102% in the past five years, at an annual cost to investors of 0.38%: https://www.share.com/investments-and-r ... acker-fund

Make of that what you will.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164244

Postby Backache » September 4th, 2018, 5:46 pm

Hadn't spotted this thread when I commented on the other thread, I suspect I will take a look at the prospectus and think seriously about investing.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164257

Postby Muddywaters » September 4th, 2018, 8:03 pm

Not invested in anything at launch previously. Is it possible to buy a chunk at NAV and then sell when the inevitable premium hits? (I’ll take my chances with that assertion)

I’ve never held fundsmith, regrettably. I do wonder whether this is WPCT all over again.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164274

Postby Alaric » September 4th, 2018, 8:54 pm

Muddywaters wrote:Is it possible to buy a chunk at NAV and then sell when the inevitable premium hits? (I’ll take my chances with that assertion)


You buy at whatever is the IPO offer price. The Fundsmith launch is reported paying the initial costs, but otherwise for £ 1 of offer price, you might get 99p to be invested with the balance paying Broker commissions etc.

From the viewpoint of the investor, there's no stamp duty or direct Broker commission or dealing fee.

Like Woolford and before that the Bolton Fidelity China IT, I do wonder if there's a certain amount of paying for the celebrity name involved. Fidelity China Special Situations has gone from strength to strength after a poor start.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164303

Postby ADrunkenMarcus » September 5th, 2018, 6:58 am

I posted elsewhere: Apparently they have 83 companies in their 'investable universe'. If a friend's recollection of what's in The Times is correct, they include Spirax Sarco Engineering and Fevertree. I hold both. The former is 5.7% of my dividend growth portfolio and 9% of my SIPP; the latter is 5.8% of my SIPP. I wonder if either will make it into the company's portfolio of 25-40 stocks. I also wonder if any of the other 81 companies are ones I already hold.

It would be interesting to see the full list!

Best wishes

Mark.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164357

Postby Hariseldon58 » September 5th, 2018, 10:45 am

Having bought many ITs at launch they often have fairly chunky launch expenses and tend to go to a discount and traditionally came with warrants to counter that.

In this case demand will probably ensure that it goes to a premium, doesn’t necessarily mean good news for investors...

I’m not sure I would add money to global investments from sterling assets when the exchange rate could be ‘volatile’ over the next 6 to 12 months. In fact I’m inclined to go the other way.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164366

Postby RececaDron » September 5th, 2018, 11:29 am

Hariseldon58 wrote:In this case demand will probably ensure that it goes to a premium, doesn’t necessarily mean good news for investors...


My guess is that there will be no scale back of applications (to the quoted £250m), and that consequently they'll raise a very large amount of money way in excess of that, satisfying all initial apparent demand, which you'd expect to diminish scope for a premium-to-NAV...

However, having observed other initial offers its seems there's a constituency of interested investors who for some reason are always unable to participate in the offer and who therefore always turn up in the secondary market in the subsequent weeks, often appearing price-insensitive.

Perhaps these are IFAs or others managing client accounts, who've made target allocations for clients which they must implement, but aren't able to take up the offer? Whatever the reason, these folks seem to buy regardless of price, set solely on implementing their target allocations, which can give rise to a significant premium in the days and weeks immediately following an initial offer.

Hariseldon58 wrote:I’m not sure I would add money to global investments from sterling assets when the exchange rate could be ‘volatile’ over the next 6 to 12 months. In fact I’m inclined to go the other way.


Concur with that. The next 9 months could bring a lot of GBP volatility, with scope for both a very significant strengthening (and a not-insignificant weakening). Finger-in-the-air guess would be 2/3 odds of the former, 1/3 the latter, so probability-wise perhaps not ideal timing to be shifting out of Sterling assets IMO.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164373

Postby Alaric » September 5th, 2018, 12:13 pm

RececaDron wrote:However, having observed other initial offers its seems there's a constituency of interested investors who for some reason are always unable to participate in the offer and who therefore always turn up in the secondary market in the subsequent weeks, often appearing price-insensitive.


Not every Broker will offer every IPO, so you may need to open a new account with a participating Broker (may not be possible with ISAs or SIPPs). In those circumstances, you have to buy "second hand".

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Re: Smithson: new Fundsmith Investment Trust to launch

#164378

Postby scotia » September 5th, 2018, 12:33 pm

Avantegarde wrote:This is the public announcement: https://smithson.co.uk/

Mr Smith makes it sound like he is onto a winner, which may be true.

By contrast, the huge F&C Global Smaller Companies IT has costs of 1.15% (according to its key information document) and has returned 94% in the past five years: https://www.theaic.co.uk/companydata/237

And the Vanguard Global Small-Cap index tracker has returned 102% in the past five years, at an annual cost to investors of 0.38%: https://www.share.com/investments-and-r ... acker-fund

Make of that what you will.

And the Standard Life Global Smaller Cos (Retail) Fund has returned 134% over 5 years.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164410

Postby RececaDron » September 5th, 2018, 2:22 pm

Alaric wrote:Not every Broker will offer every IPO, so you may need to open a new account with a participating Broker (may not be possible with ISAs or SIPPs). In those circumstances, you have to buy "second hand".


It's common in a new Offer to be able to subscribe to shares directly (from the Receiving Agent), dispensing with the need for a broker.

However, these would be unwrapped shares, so perhaps these early price-insensitive secondary market purchasers are trying to buy within tax-wrapped accounts as you suggest (and don't have the liquidity or inclination to buy direct from the Receiving Agent at NAV, then sell & re-purchase into their wrapped accounts, as a means of 'insurance').

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Re: Smithson: new Fundsmith Investment Trust to launch

#164550

Postby ADrunkenMarcus » September 6th, 2018, 7:03 am

FredBloggs wrote: These days, if you buy shares in IPO, I have no idea if this is still an option. Does anyone know?


I don't know. However, if you are subscribing for securities at a fixed price then surely it's much clearer how much money you're putting into your tax-sheltered account and therefore how much of your annual subscription you have used up? This is somewhat different to if you had existing shares that changed in price every second.

Best wishes

Mark.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164712

Postby scotia » September 6th, 2018, 5:39 pm

Hargreaves Lansdown have emailed their clients concerning the Smithson IT, indicating "You will be able to invest with HL. Applications will open soon". They have included a "Register My Interest" button.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164715

Postby Lootman » September 6th, 2018, 5:45 pm

ADrunkenMarcus wrote:
FredBloggs wrote: These days, if you buy shares in IPO, I have no idea if this is still an option. Does anyone know?

I don't know. However, if you are subscribing for securities at a fixed price then surely it's much clearer how much money you're putting into your tax-sheltered account and therefore how much of your annual subscription you have used up? This is somewhat different to if you had existing shares that changed in price every second.

Whether or how much you have subscribed to your ISA in the tax year is surely irrelevant?

The only thing that matters is that you have enough cash in the account for the IPO. That may arise from uninvested subscriptions, dividends or from the proceeds of sales.

The fact that it is an ISA seems moot. Except that in a taxable account the broker may grant you margin to buy a new issue even if you don't have the cash, whereas there is no concept of margin in an ISA.

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Re: Smithson: new Fundsmith Investment Trust to launch

#164717

Postby Alaric » September 6th, 2018, 5:53 pm

Lootman wrote:The only thing that matters is that you have enough cash in the account for the IPO. That may arise from uninvested subscriptions, dividends or from the proceeds of sales.


Assume you've already subscribed the full amount to ISAs this year. You want to buy the new IT at launch and hold it in your ISA. Your ISA provider isn't offering this IPO. What to do?

I suppose there's a convoluted solution in taking out a new ISA with a participating Broker and asking for cash or shares to be transferred to cover the amount you want to invest. You are at the mercy of the transfer process though, which can be notoriously slow.


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