Buffettology Smaller Companies Investment Trust Launch

[shawsdale]

The managers of the Buffettology open-ended funds have this morning announced their intention to launch
the Buffettology Smaller Companies Investment Trust, focusing on UK smaller companies.
Any thoughts?

https://www2.trustnet.com/Investments/Article.aspx?id=202009250700020645A

[simoan]

The managers of the Buffettology open-ended funds have this morning announced their intention to launch
the Buffettology Smaller Companies Investment Trust, focusing on UK smaller companies.
Any thoughts?

https://www2.trustnet.com/Investments/Article.aspx?id=202009250700020645A

Thanks very much for highlighting this. Whilst I expect the Trust to have several holdings in common with my own portfolio once invested, I may take part in a smallish way as part of the IPO as I like the business perspective investment approach of Keith Ashworth-Lord. Either that, or I may front run him and buy some of the companies he will be looking at before he gets a look in. Time to revisit my Buffettology filter

All the best, Si

[simoan]

FWIW I just received an email from Primary Bid to take part in the IPO. Offer ends October 23rd. I will probably take part but within one of my tax free accounts as I imagine the IPO will be accessible through the usual broker platforms.

All the best, Si

[Lootman]

I may front run him and buy some of the companies he will be looking at before he gets a look in. Time to revisit my Buffettology filter

The problem is that funds often have a life before they become public. Typically a fund manager will run a vehicle like this for weeks, months or longer before the public can apply. They use seed money from the fund manager itself, or contributions from partners, institutions and HNWI individuals. Then, as the fund becomes public, investments are sold off to repay the initial investors.

That also mitigates the attempts of anyone trying to front run them. Index funds do something similar to avoid being taken advantage of for predictable index changes.

[simoan]

I may front run him and buy some of the companies he will be looking at before he gets a look in. Time to revisit my Buffettology filter

The problem is that funds often have a life before they become public. Typically a fund manager will run a vehicle like this for weeks, months or longer before the public can apply. They use seed money from the fund manager itself, or contributions from partners, institutions and HNWI individuals. Then, as the fund becomes public, investments are sold off to repay the initial investors.

That also mitigates the attempts of anyone trying to front run them. Index funds do something similar to avoid being taken advantage of for predictable index changes.

Yes, but given the size of the companies involved it will be obvious from RNS announcements if they want to acquire any meaningful holding pre-IPO. They have a legal obligation to release those and so they will not be able to acquire sizeable holdings without everyone knowing. I follow Castlefield Partners RNS releases closely given that I have several holdings in common with the existing Buffettology OEIC. I'd be very surprised if several holdings in the OEIC do not also appear as sizeable holdings in the IT.

All the best, Si

[simoan]

I may front run him and buy some of the companies he will be looking at before he gets a look in. Time to revisit my Buffettology filter

The problem is that funds often have a life before they become public. Typically a fund manager will run a vehicle like this for weeks, months or longer before the public can apply. They use seed money from the fund manager itself, or contributions from partners, institutions and HNWI individuals. Then, as the fund becomes public, investments are sold off to repay the initial investors.

That also mitigates the attempts of anyone trying to front run them. Index funds do something similar to avoid being taken advantage of for predictable index changes.

Yes, but given the size of the companies involved it will be obvious from RNS announcements if they want to acquire any meaningful holding pre-IPO. They have a legal obligation to release those and so they will not be able to acquire sizeable holdings without everyone knowing. I follow Castlefield Partners RNS releases closely given that I have several holdings in common with the existing Buffettology OEIC. I'd be very surprised if several holdings in the OEIC do not also appear as sizeable holdings in the IT.

All the best, Si

BTW here's the link if you want to see all Castlefield RNS releases: https://www.investegate.co.uk/Index.asp ... astlefield

All the best, Si

[simoan]

The company now has a website here: https://www.buffettologyit.co.uk from which you can download the prospectus as I have just done. Happy reading!

All the best,Si

[simoan]

Mixed feelings here. With his long held stake in Games Workshop, isn't the manager a bit of a one trick pony in his Buffetology Fund?
RVF

Easy to forget about Ab Dynamics and Bioventix! I've just read the prospectus and it's pretty much as expected for a KAL vehicle. No miners, no early stage biotech, no banks and insurers etc:

The Portfolio will be diversified by industry and sector, although it is unlikely that the Company will invest in early stage technology or biotechnology companies, mining and extraction companies, or companies in the banking and insurance sectors.

He's a conviction investor so not for the faint-hearted i.e. looking to hold 10% of equity of portfolio companies. If he can find another Games Workshop you can forget about misguided holdings like Revolution Bars and Restaurant Group, but as we all know you can't get them all right.

I'll probably take a small position in the IPO.
All the best, Si

[Arborbridge]

I used to follow Keith Ashworth-Lord's magazine - I think called "Analyst"??

I admired his calm intellectual approach which seemed very logical and inpressive. Whether this ever has turned into a gold standard return, I've never concluded. My dummy portfolio based on the magazine did not impress particularly and then I lost touch when the magazine disbanded and the fund went through various iterations which made it too much of a fag to follow.

I really wish him well - such an approach deserves to succeed.

Arb.

[everhopeful]

To buy into a new Trust in a sector where current Trusts are trading at large discounts requires great confidence in the management. Some Trusts in this sector are trading at discounts greater than 20%. My own exposure is with Henderson Smaller Companies which is at a 14% discount. I would be surprised if this new Trust were not to trade at a discount after launch and if I wanted to buy in to it (which I don't) I would wait until after launch.

[simoan]

For those that may be interested here is a list of companies already held at some point recently by the OEICs managed by Castlefield that fall within (or close to) the market cap remit for the new IT:

Ticker | Name                              | Mkt Cap £m
DRV    | Driver                            |      25.04
AIR    | Air Partner                       |      42.27
ELCO   | Eleco                             |      66.22
MBH    | Michelmersh Brick Holdings        |      89.03
TRI    | Trifast                           |     140.01
RM.    | Rm                                |     142.68
TAM    | Tatton Asset Management           |     144.74
SBIZ   | Simplybiz                         |     150.05
BMY    | Bloomsbury Publishing             |     162.99
BVXP   | Bioventix                         |     210.98
SCPA   | Scapa                             |     220.10
TSTL   | Tristel                           |     224.25
EKF    | Ekf Diagnostics Holdings          |     272.76
GLE    | Mj Gleeson                        |     353.03
PAY    | Paypoint                          |     368.35
MAB1   | Mortgage Advice Bureau (holdings) |     369.21
CRW    | Craneware                         |     397.03
ABDP   | Ab Dynamics                       |     427.26
DOTD   | Dotdigital                        |     431.94
NCC    | Ncc                               |     492.14
TUNE   | Focusrite                         |     505.57

Air Partner was sold from the main Buffettology fund but only because it was too small and had no effect on returns of the fund. Driver was also sold for the same reason. I hold, or have held, several of these. Sold out of Tristel and Focusrite way too soon Bought some more RM last week.

All the best, Si

[simoan]

To buy into a new Trust in a sector where current Trusts are trading at large discounts requires great confidence in the management. Some Trusts in this sector are trading at discounts greater than 20%. My own exposure is with Henderson Smaller Companies which is at a 14% discount. I would be surprised if this new Trust were not to trade at a discount after launch and if I wanted to buy in to it (which I don't) I would wait until after launch.

Surely the point is that you are buying into the highly focused and proven investment approach of the manager here, not some generic, dreadful pile of unfocussed small cap rubbish which deserves to trade at a large discount. I am essentially a small and mid cap investor that uses a similar quality approach to Keith Ashworth-Lord and I wouldn't touch any of the top 10 holdings of the Henderson Small Cap IT with eight bargepoles strapped together. In fact most of them aren't even small caps! Every time in the past I have ever looked at the holdings and investment approach of a Small Cap IT I have basically shuddered. Most have way too many holdings - the Henderson IT has over 100!! But then I don't suppose many of them would have matched my own returns over the past 10 years.

Time will tell if the trust trades at a discount or a premium, I would suspect given past performance of KA-L it would maybe trade at a small premium other than the natural 2p premium at IPO. And of course, you don't have to go all in on day one but I would expect the spread could be quite wide, so the idea of buying below 100p after the IPO may not be a good one. We shall see...

All the best, Si

[Arborbridge]

But then I don't suppose many of them would have matched my own returns over the past 10 years.

That sentence seems key, and explains why you can afford to be dismissive of various funds. Good for you, but I would venture to suggest that most investors do not have your talent and would be happy with something more modest.

PS I haven't checked the funds you mention, but I have a couple of small company funds which have been at the top of my pile for performance - so they aren't all generic rubbish.
Arb.

[everhopeful]

Well Simoan if you are so good at it why pay somebody else to do it for you?

[simoan]

Well Simoan if you are so good at it why pay somebody else to do it for you?

This is simple. I am now financially independent in my mid 50's and so would like to spend less time scouring the small cap space and day to day active investment. I am happy to give money to investment managers whose approach is focused and is similar to my own. For example, over the past 8 years I have moved 15% of my portfolio into Fundsmith Equity T Class. I also have a significant stake in the Smithson IT. When it comes to UK Small Caps I am happy to gradually hand that over to Keith Ashworth-Lord using this IT as a vehicle.

BTW The MSCI UK Small Cap Index that most of the funds use as their benchmark, and which in a lot of respects they track, has returned 8.8% annualised over the past 10 years to the end of August - that's good but not great given the bull market we have seen and I suspect many private small cap investors have easily beaten that, so I don't consider my own performance exceptional in any way.

All the best, Si

[shawsdale]

The Buffettology investment trust launch is not going to proceed as "overall demand has not been sufficient to meet the Minimum Gross Proceeds set out in the prospectus":

https://www2.trustnet.com/Investments/Article.aspx?id=202010260700071200D

[simoan]

The Buffettology investment trust launch is not going to proceed as "overall demand has not been sufficient to meet the Minimum Gross Proceeds set out in the prospectus":

https://www2.trustnet.com/Investments/Article.aspx?id=202010260700071200D

That's disappointing but not totally surprising given the current climate for IPOs. The good news is this means there is maybe a lack of institutional appetite for UK small caps and in this kind of environment opportunities for PI's lie. Guess I'll have to continue doing my own thing for a while longer...

All the best, Si