City veteran Terry Smith will invest £25m of his own money in a global mid and small cap trust his Fundsmith business is launching.
In an announcement to the London Stock Exchange this morning (4 September) Fundsmith said the new trust would invest in companies with a market cap between £500m and £15bn, with the average being £7bn.
The trust, called the Smithson Investment Trust, will be managed by Simon Barnard but Mr Smith said he will support the management team in his role as chief investment officer.
Its managers have identified and researched an investable universe of 83 "compelling" companies, from which they will select between 25 and 40 to put into the portfolio.
Mr Smith said the new trust will use the same strategy he uses on his main fund, Fundsmith Equity: "buy good companies", "don’t overpay" and "do nothing".
He said: "Last year we hired Simon Barnard and Will Morgan from Goldman Sachs to research the opportunity presented by applying Fundsmith's proven investment process to companies typically smaller than the ones the Fundsmith Equity fund would invest in, hence the name Smithson.
"I am delighted that Simon and Will will manage the fund, with my oversight as Fundsmith's chief investment officer. I will be investing £25m in Smithson at launch with fellow Fundsmith partners and employees investing an additional £5m."
The Smithson trust will charge 0.9 per cent, and is based on the market cap of the trust, not the more commonly used net asset value.
The Fundsmith Equity fund has grown to £16bn in size and is the best performer from 150 funds in the IA Global sector over the past five years to 4 September. The fund has returned 167 per cent over that period of time compared with 72 per cent for the sector, according to data from FE Analytics.
His company also runs the Fundsmith Emerging Markets investment trust which, during the past year to 3 September, returned 9 per cent compared to a loss of 0.4 per cent for the sector average.
Mr Smith, who grew up in Stratford in east London and is the son of a lorry driver, began his career as a banks analyst and came to the attention of the wider market when, while working at Barclays, he wrote a piece of analysis suggesting investors sell Barclays shares.
He launched Fundsmith in 2010 with Julian Robins, another former bank analyst with Barclays who is now head of research at the company.
Tom Sparke, investment manager at discretionary fund manager GDIM in Cambridge does not own Fundsmith and said the funds run by Terry Smith deploy a growth style of investing, while he prefers to invest in funds with a less pronounced style bias.
david.thorpe@ft.com
