Fundsmith has announced plans to create a new £250m investment trust, which will target global small to mid-cap businesses.
City veteran Terry Smith, who founded £17bn equity fund Fundsmith in 2010, will invest £25m in Smithson Investment Trust.
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The Smithson team will be lead by former Goldman Sachs analysts Simon Barnard, as investment manager, and assistant investment manager Will Morgan, supported by Smith.
"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," Smith said.
“I am delighted that Simon and Will will manage the fund, with my oversight as Fundsmith’s chief investment officer."
Fundsmith partners and staff will collectively invest another £5m in the new fund, with Smith aiming to raise the rest via a public offering.
Researchers at the fund have identified an "investable universe" of 83 companies, from which they will select 25 to 40 firms when Smithson is launched. Fundsmith will bear all costs related to the launch.
Commenting on the announcement, AJ Bell personal finance analyst Laura Suter said: "Terry Smith is perennially popular with investors, with his Fundsmith Equity Fund consistently topping the list of the most-bought funds.
"His no-nonsense approach and buy-and-hold strategy with a concentrated portfolio of stocks has attracted investors in their hoards, with the flagship fund reaching £17bn since its launch in 2010."
She added: “However, the Fundsmith Emerging Equities Trust, launched more recently in 2014, has not performed as well, significantly underperforming the market: it has returned 28.8 per cent since inception compared to 47.6 per cent from the MSCI Emerging and Frontier Markets index.
“Despite this underperformance investors continue to buy, with the trust consistently trading on a premium. Investors in the new trust should be aware of this, as demand could well be high, driving the trust to a premium, and they should ensure they don’t overpay for the new fund."
Market conditions might favour a small to mid-cap trust, Suter said, adding that recent focus on only a few sectors potentially offers access to small and medium firms at attractive prices.