Smithson Investment Trust: Fundsmith key strategies

Big Demand For Smithson Investment Trust

It probably wasn’t a great surprise to see that Smithson Investment Trust is looking to raise more cash. But it was a little surprising that it was left so late and that it’s increasing by so much.

The initial offer was for up to £250m (25m shares at £10) but this has been raised to £600m.

In my earlier review, I threw out figures of £500m and £750m for the potential demand. More by luck than judgement, that might prove to be more or less correct.

No scaling back?

The good news for investors is that this probably means that applications won’t be scaled back. It would seem the issue size is being expanded to cope with as much demand as possible. But we’ll find out for sure when the results are published next Wednesday (17th October).

Indeed, the total raised could go higher still. In the small print of today’s announcement was a line that the total number of shares could be increased from 60m to as much as 90m.

The amount that might be raised in the placing programme in the 12 months following the new issue has also been raised, from 10m to 15m shares. So we could conceivably end up north of 100m shares with a market cap in excess of £1bn.

How Smithson Investment Trust compares

It looks like Smithson is going to prove to be considerably more popular that Fundsmith Emerging Equities.  That raised £193m back in June 2014, although its number of shares in issue has increased by more than a third since then.

And Terry Smith’s new fund is certainly popular than Mobius Investment Trust which joined the market last week. It was looking for £200m but managed only half of that.

However, Smithson will probably fall short of the £800m raised by Woodford Patient Capital Trust in 2015. It does seem set to beat the £460m raised by Anthony Bolton’s Fidelity China Special Situations. That was back in 2010, though, when global share prices were pretty depressed.

Still, £600m is not to be sniffed at!

Quick off the mark

One concern that investors might have is that it might take a bit longer for the fund to invest £600m than £250m. Thankfully, it looks like this won’t be a major issue.

Smithson reckons it can invest 92% of the issue proceeds within 7 business days. The remainder should take a further 22 days.

These figures seem rather precise to me, but I expect there is some sandbagging in there.

Not long to go

The offer officially closes at 1 pm this Friday (12th October). However, if you are investing through an online broker it may impose a slightly earlier deadline. For example, Hargreaves Lansdown and Interactive Investor close at 11 am on 12th October and AJ Bell at 5 pm on 11th October. In the interest of good disclosure, I should say they I have applied for this one.

A supplementary prospectus should be published later today, but I suspect this will just be to update the numbers where necessary. I wouldn’t expect there to be any fundamental change in the fund’s makeup.

All going well, the shares should begin trading by the end of next week on Friday 19th October.


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