Smithson raises launch target to £600 million

Smithson, the brain child of veteran investor Terry Smith, has increased the amount of shares available to investors before the trust’s launch. If successful, it will be one of the largest trust IPOs in UK history.

Funds and Investment Trusts October 9, 2018 by Tom Bailey

Interest in Smithson investment trust appears to be picking up, with the trust’s board announcing an increase in shares on offer to investors before launch, more than doubling its original fundraising amount.

The brain child of veteran investor Terry Smith, Smithson was originally aiming to raise £250 million. The amount of shares offered to investors in the subscription stage has now been increased, leading to a launch target of £600 million.

The trust will attempt to apply the successful investment philosophy of Smith’s Fundsmith Equity fund, but instead focus on global smaller companies deemed too small for the original Fundsmith.

Money Observer recently quizzed Smith about the original seemingly small launch size of Smithson when compared to £17 billion under management by Fundsmith Equity. 

While Smithson’s new launch target is still way below Fundsmith Equity’s mammoth £17 billion (as an open ended fund focusing on global mega-companies, Fundsmith Equity is able to manage greater inflows), ), raising £600 million would put Smithson way ahead of other new trusts launched this year.

According to figures from the Association of Investment Companies, there were seven new launches in the first half of 2018, raising a collective £759 million.

The second half of 2018 also saw the high profile launch of Mark Mobius’ Mobius Investment trust. Despite Mobius’ reputation and wide press coverage, the trust was only able to raise half of its £200 million launch target

Too big to fail?

Raising £600 million would put Smithson among one of the largest investment trust launches in UK history.

Such strong initial interest at launch, however, has not always worked out well for investment trusts.

The title for the largest amount ever raised at launch for an investment trust is held by Neil Woodford’s Woodford Patient Capital, which raised £800 million in 2015. The trust has since seen less than stellar performance, with a number of investments failing to pay off. As of October 2018, the trust’s share price was down by around 16 per cent since making its stock market debut.  

The previous record holder was Mercury European Privatisation, which raised £549 million in 1994. Within five years waning performance forced the trust to completely overhaul its investment remit before ultimately winding up in 2004, just a decade after its initial launch.

Smithson’s subscription period ends at 11am on 12 October.

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