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Fundsmith Emerging Equities closure: ‘Not everything he touches turns to gold’

Biotech trusts top performance charts in February

Investment Week, 15 September 2022:

Following yesterday’s (14 September) revelation that the £319m Fundsmith Emerging Equities investment trust (FEET) would be entering a voluntary liquidation, industry experts were divided on the decision.

Investment trusts being wound up is not uncommon and many would argue that it can be the right thing to do when a portfolio reaches the end of its useful life…

Nick Britton, head of intermediary communications at the Association of Investment Companies, agreed that wind-ups are a healthy process that “allows shareholders to receive the net asset value of their investment, net of any wind-up costs, and helps the sector to renew itself”.

Not uncommon

FEET’s proposal would bring the number of liquidated investment companies up to five year this year. This was in line with with recent history, where the average is six or seven liquidations per year.

The liquidation is still to be approved by shareholders at the next general meeting, due to occur by the end of November…

Other options

Ben Yearsley, investment consultant at Fairview Investing, asked why this should not also happen for FEET. He said: “I am surprised the board has not put FEET out to tender.

“It is a decent size so why not see if its shareholders want someone else instead? This just shows the general malaise with emerging markets investing.”..

James Carthew, head of investment company research at QuotedData, said: “It is unfortunate that the global emerging markets sector has lost three funds in quick succession, but it has to be acknowledged that at least two of these were not worth persevering with.

“In such circumstances, our preference would be for some mechanism that offers investors a choice of cash at asset value or a rollover into another closed-end fund. But rollovers are harder to achieve when the fund doing the absorbing is trading at a discount.”

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