Terry Smith’s Smithson pips Woodford to become biggest ever UK trust launch

Smithson will break investment trust launch records when it makes its stock market debut on 19 October.

Smithson investment trust, the brainchild of Terry Smith, will become the biggest ever investment trust launch when it makes its stock market debut later this week (19 October), pipping Neil Woodford’s Patient Capital Trust, which previously held the crown.

Following strong demand from private investors, Smithson comfortably exceeded its fundraising targets. It initially aimed for £250 million, before raising its target to £600 million. Both figures were soundly beaten, with Smithson raising £822.5 million. This surpasses the previous recordholder – Woodford Patient Capital – which raised £800 million in 2015. 

Despite demand being high, Smithson applications will be met in full and will not be scaled back. The issue price was £10 per share and Smithson will trade under the ticker SSON. All issue costs have been absorbed by Fundsmith, the investment manager of Smithson.

Smithson will attempt to apply the successful investment philosophy of Smith’s £18 billion open-ended Fundsmith Equity fund, but instead focus on global smaller companies deemed too small for the original Fundsmith fund.

It will not be managed by Smith, but as chief investment officer he will fully participate in outright buying and selling decisions. Simon Barnard, who joined the firm in September 2017, will be lead manager assisted by Will Morgan, who joined Fundsmith earlier last year.

Commenting on the fundraising, Terry Smith, chief executive officer and chief investment officer of Fundsmith, says: Our thesis that many of the existing small and mid-cap funds in the market are anachronistic by being overly home-biased, and that there was a gap for a quality small and mid-cap global equity fund appears to have been borne out by a wide range of investors subscribing for the Smithson offer.”

He adds: “I look forward to working with our portfolio management team to deploy the funds raised into the compelling growth companies we have identified.”

According to Numis, the investment trust analyst, the vast majority of the money raised by Smithson is expected to be deployed within seven business days.

Terry Smith will invest £25 million in Smithson at launch, with other Fundsmith partners and employees investing an additional £5 million. Annual management fees are 0.9% of market capitalisation.

Ewan Lovett-Turner, an analyst at Numis, says Smithson has bucked the trend, as previously this year the largest investment trust launch with an equity mandate had been Baillie Gifford US Growth, which raised £173m.

He adds: "We had expected to see strong demand for Smithson, but were still surprised by the amount of capital raised. Smithson benefited from a high-profile management group, which is extremely popular with retail investors and wealth managers.

"The fact that the manager covered all launch costs will have been an attraction to some investors. In addition, an IPO can sometimes create its own momentum, with investors keen to participate if the launch is going well, based on the expectation that the fund will trade at a premium in the secondary market."

Year-to-date, to the start of October, there have been 12 new investment trust launches, raising a total of £1.4 billion. Notable new issues include Baillie Gifford US GrowthJPMorgan Multi-Asset and Tritax Eurobox.  

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