Terry Smith explains..........

[xeny]

So, the improvement in performance at equal risk is 0.01%? I think Feynman might also conclude that an outperformance of that magnitude is just a experimental error within the underlying data.

.01%/week though so a little more significant over a year. The following rough maths is terribly short of significant figures, but I did to give myself an idea of the impact over a year:

The factsheet says that T class accumulator has returned an average of 19.5%/year, which I make to be .343% a week (19.5%^(1/52)).

An extra .01% gives .353%/week or .353%^52 vs .343%^52 /year to get average annual rates of return of 20.1% vs 19.5% if that extra performance had been added to the equity fund's historic performance.

I'm intrigued to see what product they'll offer and when.

[xeny]

Put in perspective then,1% is one in a hundred, 0.1% is one in a thousand, 0.01% is one part in ten thousand. Statistically completely irrelevant? Since any out performance, if it is there at all, cannot be linear.

It's a long time since I studied this, but as I understand it, the size of a difference isn't necessarily related to it's statistical significance/relevance (just to check do you mean relevant or more "is it really there"?) rather the size of the data set that exhibits the difference is more important.

For example, a data set of 10 items that showed a 15% difference to the norm is less statistically significant than a data set of 500 items that showed a (say) 3% difference.

[Backache]

That effect has been described quite a few times. However there is quite a lot of data missing from the graph/article. such as frequency at which one has to rebalance and whether or not transactional costs are included.

[RececaDron]

I'm intrigued to see what product they'll offer and when.

Conjecture:

Based on prior statements regarding the main fund's daily dealing constraining them to the liquidity offered by very large caps, I'd assume the new fund would be a closed-end fund, ie. IT.

And, the FT article would be the first of a sustained marketing push, leading to a launch at the beginning of the TY19 tax year (in order to maximise ISA subscriptions from the punters), with a huge amount raised.

Woodford's WPCT trod this path. I wouldn't draw too many parallels, because while WPCT's underlying strategy looks pretty duff (cold fusion, massive illiquid stakes in moon-shots etc) Fundsmith's is pretty sound.

However, with every man and his dog likely to subscribe, should the new fund encounter tricky markets in the year or two or three after launch, or the fund fail to deliver the goods, then it's to be hoped holders read what was on the tin: that Fundsmith funds can fall as well as rise, and that ITs may go out to a chunky discount if secondary market demand is limited because those who want it already hold buckets of it.

Still, those private islands don't pay for themselves!

[Backache]

It's just been announced as the Smithson Investment Trust to launch in October. 0.9% annual management fee and launch costs To be absorbed by Fundsmith.
A global small cap trust.

[ADrunkenMarcus]

It's just been announced as the Smithson Investment Trust to launch in October. 0.9% annual management fee and launch costs To be absorbed by Fundsmith.
A global small cap trust.

Nice!

[xeny]

There's a PDF here:

https://smithson.co.uk/

[Avantegarde]

Very interesting. 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 ... cker-funds
Make of that what you will.

[Backache]

A few points arise from this I guess
The Management fee is 0.9% of the market cap rather than NAV, this clearly a good thing if it goes to a discount , his Emerging markets trust has stood at a slight premium for much of its existence, though the premium has been small. There look to be about 0.2% of further costs affording to the document.

In his FT article much has been made of the adding of small companies to the larger ones to increase return at the same risk.though the groups used were MSCI indices .
If he is using the same methods for using the two funds will the groups of companies have sufficiently different characteristics to get the same effect?
SO far using his methodologies for investing in emerging and frontier markets he has lagged the index.

I will await the prospectus with interest and probably invest I have so far been very happy with the results produced.

[ADrunkenMarcus]

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.

[Fluke]

The prospectus for the new Smith fund (Smithson) was released yesterday, I've scanned it and as far as I can tell it confirms what I understood of the fund from news articles. I'm not skilled at reading prospectuses and so not sure if there is anything in it that should worry a small retail investor, other than perhaps that it is not covered by the FCA, is this unusual for this type of fund? Anybody else read it/thinking of investing?

https://904cagprddoc.blob.core.windows. ... e0e012.pdf

[Alaric]

other than perhaps that it is not covered by the FCA, is this unusual for this type of fund?

This presumably is the paragraph you are thinking of

The Company is not authorised or regulated as a collective investment scheme by the FCA.
However, from Initial Admission, it will be subject to the Listing Rules and the Disclosure Guidance and Transparency Rules. The principal legislation under which the Company operates and under which the Ordinary Shares will be issued is the Companies Act. The Directors intend, at all times, to conduct the affairs of the Company so as to enable it to qualify as an investment trust ...

As previously announced they are running it as an Investment Trust which has its own specialist taxation and legislation structure long predating the FCA or any of its several predecessors.

The disclosure wording is completely normal for this type of structure.

[Dod101]

Fluke
I will almost certainly invest but that should not sway you one way or the other. You must decide what to do by reading the prospectus or simp0ly take a punt on Terry Smith.

I am using funds released from my holding in British Land and they have not been very inspiring so I expect Smithson will prove a better investment.

Dod

[Fluke]

As previously announced they are running it as an Investment Trust which has its own specialist taxation and legislation structure long predating the FCA or any of its several predecessors.

The disclosure wording is completely normal for this type of structure.

That explains that then, thanks Alaric

[Fluke]

Fluke
I will almost certainly invest but that should not sway you one way or the other. You must decide what to do by reading the prospectus or simp0ly take a punt on Terry Smith.

I am using funds released from my holding in British Land and they have not been very inspiring so I expect Smithson will prove a better investment.

Dod

Dod will you be investing at launch or wait to for a while until the price settles down? New territory for me.

[Alaric]

will you be investing at launch or wait to for a while until the price settles down?

On expense grounds, you buy at IPO because you save on stamp duty and commission.

If you have a view that the price will go to a discount before recovering, then you wait and see.

If you think the price will go to a discount and not recover, you don't participate.

If you think that the price will rocket, then you buy more than you really want longer term with a view to selling some for a short term profit.

If it's really popular, your IPO application might be scaled back.

[Dod101]

Alaric has given us a series of circumstances but I fear for a new investor the comments are not very helpful. For what it is worth I will apply at launch simply because I am then buying with no buying costs and probably near to NAV. The risk with this IPO though is that the applications might well be scaled back if indeed they want 'only' £250 million I think it was.

Dod

[Alaric]

For what it is worth I will apply at launch simply because I am then buying with no buying costs and probably near to NAV.

I might well do the same. What you are backing is not so much the ability of the fund managers to detect winners, but to avoid losers. That's helped presumably by their understanding of accounting methods and weeding out those Companies who stretch accounting standards to breaking point.

[Dod101]

Yes but the question was when to buy not the reasons for buying

I am buying (and have just applied via ATS) because I missed out on Fundsmith and think Smithson will be run along the same lines with a selection of smaller companies. They may prove more volatile but I do not mind that.

Dod

[Backache]

Yes but the question was when to buy not the reasons for buying

I am buying (and have just applied via ATS) because I missed out on Fundsmith and think Smithson will be run along the same lines with a selection of smaller companies. They may prove more volatile but I do not mind that.

Dod

Not quite sure how you can say you missed out on Fundsmith ? It is an open ended OEIC and just as easy or even easier to invest in than it was at launch.
I am not sure that there is anything to suggest that Smithson will necessarily be a better buy now than Fundsmith other than possibly the small size effect. FEET has been significantly less successful.
Smith and Robins themselves will not be running it even if Smith will be overseeing it.