The Smithson Investment Trust, the recently-launched Fundsmith investment company, has nearly invested the full amount raised in its record initial public offering (IPO), after likely being buoyed by a bounce back in growth stocks after October’s sell-off.
In an announcement to the London Stock Exchange on Wednesday, Fundsmith said it had deployed more than 95% of the £822.5m ($1.05bn, €927m) it raised for IPO on 19 October.
The listing is the largest of a UK-domiciled investment trust to date, beating Woodford Patient Capital’s £800m launch in April 2015.
A statement from Fundsmith said: “The board of Smithson Investment Trust plc is pleased to announce that in excess of 95% of the issue proceeds raised upon admission have now been invested in line with the company’s expectations.”
Portfolio Adviser previously reported that Fundsmith had expected the capital to be deployed within a week of the IPO after a company spokesperson said it would take a “matter of days”.
The trust will invest in 25 to 40 global small and medium sized companies between £500m and £15bn in market capitalisation, and an average of £7bn. According to the trust’s factsheet, 49% will be US companies, 14% UK, 7% Japanese, 4% French and 1% Swiss.
Red October
Jason Hollands, managing director at Tilney, said the aggressive ‘Red October’ sell-off is likely to have helped the trust pick up stocks that its model portfolio would have earmarked during the fundraising stage. He noted there has been a bounce back in certain growth stocks, a part of the market Fundsmith as a house likes to fish in.
“There is a view that October is looking like the move we saw in February which was also triggered by worries about rising yields, so I suspect they have taken the view this as an opportunity to pick up stocks they have been planning on buying at valuations that had probably overshot in the sell off,” said Hollands.
“If you have a big pot of cash to spend and you think there is a buying opportunity, then why not get it invested quickly?”
Willis Owen head of personal investing Adrian Lowcock said deployment was quick but not surprising given the trust is investing in large and mid sized companies, and its investment philosophy and process are well established so it would have had its ideas laid out.
He added: “While October’s sell-off would have helped, it is important to remember the philosophy is about buying good companies first and price is a secondary factor so waiting for the price to fall could be something that never happens. As such I think the quick allocation of the proceeds isn’t too surprising.”
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