Investment trust insider Smithson versus North Atlantic – James Carthew: Smithson is flying, North Atlantic is trying
Global smaller companies trust Smithson (SSON) published its inaugural results last week. By most measures, it has had a phenomenal start in life: the largest investment trust launch ever (£822.5m), topped up with another £426m of share issuance, and returns 18% ahead of benchmark over its first accounting period (19 October 2018 to 31 December 2019).
The impressive expansion was aided by the trust trading at a premium since launch. The current market turmoil may test that for a while but hopefully, this will be short-lived, just as the dislocation triggered by the Sars virus was in 2003.
I have no better idea than anyone else how long the covid-19 scare will overhang economies and markets or how deep the correction will be. Strangely, even though their discounts have widened sharply, the net asset values (NAVs) of Chinese funds are up over the past month.
The rumours are that the government is propping up the market as also seems to be the case in Japan. I wonder if Trump will think about something similar as a way of boosting his re-election chances.
I am conscious though that discounts, share prices and yields that I quote here could have moved violently by the time you read this.
I like Smithson and I want it to succeed. It is an actively managed, equity fund in a closed-end wrapper – two things that many commentators dislike. I am optimistic that it will join the ranks of many other actively managed, equity trusts that both outperform benchmark indices over the long-term and equivalent open-ended funds.
With a market value of around £1.5bn, all the usual moaning about liquidity does not apply either. The board thinks it can continue to expand at a rapid rate and I agree, provided it can sustain its record of outperformance. Even 16 months in, it is probably too early to tell if that will be the case. What we do have to go on is the track record of Fundsmith Equity.
Smithson’s focus on quality companies ought to stand it in good stead in periods when investors are nervous about economic growth… read more here