Smithson is seeking to raise up to £250 million via a placing, an offer for subscription and an intermediaries offer (together the “Issue”) of ordinary shares in the capital of the Company (“Ordinary Shares”). A twelve month placing programme will also be launched.
Smithson's investments will be focused on a global basis on small and medium sized companies between £500 million and £15 billion in market capitalisation, and an average of £7 billion. The Company's investment manager will be Fundsmith LLP (“Fundsmith” or the “Investment Manager”), a fund management company established in 2010 by Terry Smith which currently manages over £18 billion.
The Smithson investment management team will be led by Simon Barnard as investment manager and Will Morgan as assistant investment manager. In addition, Terry Smith, in his capacity as Chief Investment Officer of Fundsmith, will also provide advice and support to Simon and Will, who will look to draw on Terry's decades of investment experience and expertise. Jonathan Imlah will also assist as research analyst.
Why Smithson?
· Small and medium sized companies have been shown to outperform large companies: the MSCI World SMID Cap Index (“SMID Index”) has increased in value at an annual rate of 9.3 per cent. over the past 20 years, compared with the MSCI World Large Cap Index (“Large Cap Index”), which had an annual return of 6.2 per cent. over the same period. That might not sound like a big difference, but at the end of the 20 years an investor would have made 80 per cent. more money from investing in the SMID Index than the Large Cap Index.
· Active management opportunity in small and mid caps: small and mid cap companies also have fewer research analysts studying them than larger-sized companies. For example, in the United States, the median mid cap stock has 45 per cent. fewer analysts covering it than the median large cap stock. Fundsmith believes this provides an investment opportunity to take advantage of more discrepancies between the share price and valuation.
· Small and mid cap exposure can improve portfolio risk-reward: Fundsmith's analysis shows that small and mid cap companies tend to have higher expected returns but also higher expected risk, defined as price volatility, when compared to larger companies. However, adding a small and mid cap portfolio to a large cap portfolio can raise expected returns without increasing risk, due to the different risk and return characteristics that small and mid cap companies provide.
· Fundsmith will apply its proven investment strategy:
· Buy good companies
· Don't overpay
· Do nothing
· Fundsmith will adopt two innovative elements to the Smithson IPO:
· No launch fees: Fundsmith will bear all the costs associated with Smithson's launch, meaning that for every £10 invested in the Issue shareholders will receive £10 of value on day one of trading.
· Management fees aligned with investor's interests: Fundsmith will charge 0.9 per cent. annual management fee based on Smithson's market capitalisation, not the commonly used net asset value (“NAV”), aligning the interests of the Investment Manager with shareholders.
Terry Smith, Chief Executive Officer and Chief Investment Officer of Fundsmith LLP, said:
“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.
“I am delighted that Simon and Will will manage the fund, with my oversight as Fundsmith's Chief Investment Officer. I will be investing £25 million in Smithson at launch with fellow Fundsmith partners and employees investing an additional £5 million.”
Simon Barnard, Investment Manager of Smithson Investment Trust plc, said:
“Over the last year, the Smithson team has identified and researched an investable universe of 83 compelling companies, from which we will select 25 to 40 portfolio companies at launch, that we believe can compound in value over many years, if not decades. I, along with other members of the team, will be investing significantly in the fund at launch.”
Investec Bank plc is acting as sole sponsor, bookrunner, broker and intermediaries offer adviser in relation to the Issue.
Expected timetable
|
Publication of the Prospectus |
17th September 2018 |
|
Offer for Subscription and Intermediaries Offer Close |
12th October 2018 |
|
Initial Placing Close |
16th October 2018 |
|
Admission of and dealings in Ordinary Shares |
19th October 2018 |