Sept. 23--FOUR major asset managers are launching new investment trusts, between them raising upwards of £1billion from investors. Shares in the funds will trade on the London Stock Exchange and the aim will be to make money for long-term investors -- and, of course, the managers themselves.
But the investment strategies they are employing are as different as chalk and cheese. Here, The Mail on Sunday runs the slide rule over the offerings -- and assesses whether they should form part of your investment portfolio. On the back of opinion from investment experts, each trust is given a subjective rating -- with five gold coins being the highest.
Shares in the trusts can be bought through major investment platforms such as AJ Bell and Hargreaves Lansdown.
INVESTMENT house Fundsmith, built from scratch eight years ago by City maverick Terry Smith, has earned itself a fine reputation on the back of the performance of Fundsmith Equity, its mainstream fund.
A £10,000 investment in the fund at launch in November 2010 is now worth £40,110 -- more than twice an investor would have got from a fund tracking the performance of the FTSE All Share Index.
Fundsmith is now launching investment trust Smithson, a fund investing in a mix of small and medium-sized global companies.
Smithson will be run in the same way as Fundsmith Equity, investing in a tight portfolio of quality stocks -- around 25 -- with the emphasis on holding them long term.
Companies with market capitalisations of anything between £500million and £15billion will be targeted with an emphasis on resilient businesses capable of delivering strong revenues. Although the new trust will not be directly managed by Smith -- Simon Barnard and Will Morgan have been brought in from Goldman Sachs to run it -- he will oversee. He is also putting £25million of his own personal wealth into the trust at launch.
Jason Hollands, a director of wealth manager Tilney, says the trust is 'targeting an underserved part of world stock markets' and should appeal to investors looking to broaden their portfolios. He is also reassured that Smithson will have a similar 'buy and hold' philosophy to that of Fundsmith Equity.
Hollands adds: 'The fact that Smith is putting his own money into the trust is a vote of confidence in the people he has hired to manage it and, of course, he will take a close interest in the trust's progress.'
Laith Khalaf, senior analyst at Hargreaves Lansdown, is a fan. He says: 'The trust will use an investment process which has served Fundsmith Equity well -- identifying quality companies with good growth prospects, trading at a reasonable price.'
Launch shares can be applied for until October 12 with share dealings starting a week later. The trust's annual management charge will be 0.9 per cent.
LIKE Smithson, this new trust takes its name from a stock market legend -- 82-year-old Mark Mobius, 'Mr Emerging Markets'.Mobius was behind the launch of the country's first emerging markets trust in 1989 -- Templeton Emerging Markets -- and managed it with distinction until late 2015. During his time at the helm, he delivered investors an annual return in excess of 12 per cent.
The new trust has ambitious targets -- annual long-term returns of between 12 and 15 per cent from a portfolio of between 20 and 30 emerging market companies.
While some may say Mobius is a bit long in the tooth, he has brought two emerging markets specialists with him from asset manager Franklin Templeton -- Carlos Hardenberg and Grzegorz Konieczny. The former took over the wheel at Templeton Emerging Markets in October 2015.
Like Mobius, they know the markets inside out. Although emerging markets are unsettled by currency crises in both Turkey and Argentina, and trade tensions between China and the United States, Mobius says the timing of the new launch could not be better.
He says: 'Today, there is a pessimism and nervousness in the air but as investment managers we see it as a chance to get in at close to the bottom.'
Tilney's Hollands agrees, arguing that on valuation grounds many emerging stock markets look relatively cheap compared to markets such as the United States. He adds: 'No doubt the Mobius team see this as a great time to start off with a clean sheet of paper.'
The deadline for shares in the launch is Tuesday with dealings commencing at the start of October. The trust's annual management charge is one per cent.
INVESTMENT house Active Value Investors is hoping to raise a minimum £100million for this trust that will invest in a tight portfolio of Japanese companies.
Although Active is not a household name, it manages an established investment trust -- the £1billion global British Empire. This has outperformed peers over the past three years -- a return of 76 per cent against 69 per cent for the average global growth trust -- but underperformed over five.
Reassuringly, the fund will not be a big distraction for Active's tight investment team whose modus operandi is to identify undervalued companies and then push for change that will result in that undervaluation (hopefully) being eliminated. This approach will be applied to the new trust.
Joe Bauernfreund, manager of British Empire, will front the new trust. He says: 'There are many listed smaller companies in Japan that are only waking up to the need for corporate governance reform and to become more shareholder oriented. We aim to buy some of these and then engage with management to create value for us as shareholders. This could be done by companies releasing cash sitting on their balance sheets via special dividends.'
The trust's annual management charge is one per cent and the launch's closing date is October 18 with share dealings commencing five days later. The trust is likely to pay a dividend although there is no commitment to dividend growth.
Brian Dennehy, director of investment fund scrutineer FundExpert, believes Japanese smaller companies offer investors the potential for attractive long term returns. Many companies, he says, are 'undervalued and under-researched'. But rather than take a gamble on a new trust, he suggests investors should look at established funds. These include Baillie Gifford Japanese Smaller Companies and M&G Japan Smaller Companies.
THIS trust will be managed by Merian Global Investors -- Old Mutual Global Investors as was -- and invest in UK unquoted companies. It will hope to make money as the businesses it buys move from private ownership through to a listing on the UK stock market.
The managers, Richard Watts and Nick Williamson, are established investors in small and medium-sized listed UK companies. For example, over the past five years, Watts has delivered a 103 per cent return at the helm of fund Old Mutual UK Mid Cap -- a performance only beaten by three funds in its UK all companies peer group.
Investing in unquoted companies is not their speciality, but the duo insist they are tooled up to spot businesses that will successfully make the transition from private to shareholder ownership. Merian Global Investors is led by respected investment manager Richard Buxton.
The annual management fee is competitive at 0.5 per cent although there is also an additional performance charge which will lop off a fifth of any annual return in excess of eight per cent. Launch details will be confirmed early next month.
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