Sanford Deland Asset Management is looking to raise at least £100m for the initial public offering of its UK Buffettology Smaller Companies trust.
The fund house announced today (September 25) it would float the trust at £1 a share and be managed by chief investment officer Keith Ashworth-Lord according to the philosophy of Business Perspective Investing.
The strategy, closely associated with US star fund manager Warren Buffett, starts from the premise that there is no distinction between part ownership — like buying shares in a company — or outright ownership.
Therefore, every investment decision goes through the same rigorous process of checking the firm is economically viable as if the trust was buying the entire company.
Companies also only make it into the portfolio if the valuation is a “fair price”.
The trust will invest in a portfolio of between 30 and 50 smaller companies, all listed on the London Stock Exchange or the Alternative Investment Market, with a market capitalisation in the region of £20m to £500m at initial investment.
Adopting a long-term investment horizon of at least five to 10 years, the trust will be benchmarked against the Numis Smaller Companies plus AIM index.
Sanford DeLand already runs the UK Buffettology and Free Spirit funds under the same principles, both of which are in the top 10 performing portfolios in the UK All Companies sector over the past three years.
Mr Ashworth-Lord, who runs the UK Buffettology fund, said: “We believe that the UK small cap market will continue to offer excellent investment opportunities to experienced managers who know what to look for and have the freedom to take a long-term view.
“The structure of a closed-ended investment trust, rather than an open-ended fund, means that many of the liquidity concerns over investment in smaller quoted companies can be addressed.”
Alex Brotherston, chief executive of SDL, said he was “delighted” to be increasing the options for investors to access Sanford DeLand investment experience, adding that smaller companies were “particularly attractive” seeing as they were less well researched and therefore less well understood by the investment community.
imogen.tew@ft.com
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