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Smithson Investment Trust Review 2022 – is this a good investment?

Smithson Investment Trust Review 2022 – that will be the topic of today’s article.

Nothing written here should be considered as formal financial, or any other kind of advice, and some of the facts might have changed since we penned this article.

In this article, we will have a review of Smithson Investment Trust, which has been gaining a lot of popularity all over the news in the investment realm. Just like we usually do, we will talk about some of the general information before we dive into our topic.

To begin with, let us have brief look at the definition of Investment Trust, with the help of which, we can have a better understanding of Smithson Investment Trust.

Smithson Investment Trust Review 2021
Smithson Investment Trust Review 2022 - is this a good investment? 4

Investment Trust

In most cases, people might be hearing the term Investment Trust, especially while they are from the UK or Japan.

An Investment Trust is a financial institution that pools the funds gathered from shareholders and invests the money into a portfolio of securities.

Yes, you must be wondering that this is what a mutual fund or a unit trust does, yet what makes investment trusts different from those?

Well, investment trusts offer shares of their own rather than issuing units that represent their holdings like mutual funds or unit trusts.

Usually, investment trusts have a fixed number of outstanding shares, which are continuously traded in the market.

The price of the shares of investment trusts often relies on the market value of the underlying securities, in which the investment trust has made an investment.

The demand and supply of the underlying securities in the portfolio of an investment trust also play a major role in the fluctuations of the share prices.

Nowadays, most investment trust managers tend to maintain discretion when it comes to portfolios, which is slowly becoming habitual to most investment trusts.

Smithson Investment Trust

We now know what an Investment Trust is and how exactly it operates. Therefore, we will now discuss Smithson Investment Trust, how it operates, what are its holdings, and is it worth what everyone’s saying.

Let’s know a bit more about the company, i.e., Smithson Investment Trust, in general.

This is a company based in the United Kingdom, and the primary objective of this company is to offer long-term growth in the value of their portfolio by letting the investors have exposure towards the shares of the companies that are listed/traded.

The company mainly invests in small and midsized companies, while concentrating on several sectors such as IT, healthcare, finance, industrials, consumer staples, etc.

The companies in which Smithson Investment Trust invests usually have a market cap that ranges between GBP 500 million to GBP 15 billion, and the investment manager of the company is Fundsmith LLP.

Fundsmith is an asset management company that offers products such as open-ended equity funds and investment trusts while having £26 billion worth of assets under management.

Smithson investment trust was started on 19 October 2018, and the base currency of the company is GBP.

All the primary business actions of Smithson Investment Trust are handled by “Simon Barnard” and “Will Morgan” while the chairman of the company is “Mark Pacitti”.

The ticker of Smithson Investment Trust is traded as “SSON: LSE”, and another important thing to be considered is that this company is a constituent of the famous FTSE 250 Index.

Some of the important statistics of Smithson Investment Trust have been provided below (as of September 4th, 2020):

Market CapGBP 3.21 billion
Total assetsGBP 3.15 billion
Total expense ratio1.00%
Previous Close1,952 GBX
52-week high1,966 GBX
52-week low1,440 GBX
RevenueGBP 21.83 million
Net IncomeGBP 419.6 million

Now let us have a look at what we have to say about Smithson Investment Trust as an investment asset.


The Five Best Ways To Invest Small Amounts Of Money 1
Smithson Investment Trust Review 2022 - is this a good investment? 5
  • Having it as a part of your portfolio

Well, Smithson Investment Trust has an objective of growing capital over the long term with the help of strategy where it invests in small and medium-sized companies.

Even though these companies are said to be small, they come with the opportunity for growth and tend to perform well compared to the already existing stocks.

However, these companies do contain some risk compared to the companies that are already in the game for a long time.

It can be considered to be the best part in the portfolios where there are some other trusts, which consist of ‘value’ stocks/securities.

In simple words, the Smithson Investment Trust can be said as a portfolio component that is aptly suitable for the people who opt to have a growth portfolio.

  • How good is the manager?

Simon Bard, who is one of the managers of the company, has joined the asset management company ‘Fundsmith’ in the year 2017 and was the manager of Smithson Investment Trust since its inception.

After Bard graduated from Cambridge University, he became a research analyst of Goldman Sachs Asset Management before he pursued his career as a portfolio manager.

Will Morgan is the assistant portfolio manager of Smithson Investment Trust and has been assisting Simon Bard while being in that role since the launch of the company.

He was in Goldman Sachs for a period of 17 years before he joined Fundsmith in the year 2017. He doesn’t just have expertise in portfolio management, but he is also into equity sales and research & analysis.

Terry Smith, who founded Fundsmith and is the manager of the Fundsmith Equity Fund, also offers his help whenever needed when it comes to making crucial decisions.

  • Investment Strategy
Cross Asset Investment Strategy
Smithson Investment Trust Review 2022 - is this a good investment? 6

Smithson Investment Trust opts for a buy-and-hold investment strategy, which is the same as the strategy followed by Fundsmith Equity.

As we know already, Smithson Investment Trust invests in companies having a market cap ranging between £500 million and £15 billion. Yet, the average market of the companies in which Smithson Investment Trust invests is around £9.6 billion.

Nevertheless, the manager of the company has the ability to invest in non-listed companies or the manager can borrow money to make an investment.

Anyhow, Smithson Investment Trust currently does not involve in either of the above-mentioned activities, especially because the risk involved with the investment increases on a significant level.

The manager thoroughly searches for businesses of higher quality, which are prone to provide profits and establish their presence in their specific sector.

The priority is to the companies having intangible assets like brand power, intellectual property, products & services, etc., without which, the consumers might feel difficulties, or it might be hard for replacing these assets.

One of the major factors of growth according to Smithson Investment Trust is sustainable growth over the long term is the primary focus.

This is why they try to avoid investing in the companies that are involved with a lot of debt such as banks or real estate companies.

Another good aspect of their investment strategy is that they don’t try to time the market, which helps them cope with all the economic difficulties in sectors related to finance, utilities, and transport.

While buying companies, Barnard is very conscious of the valuation of the companies, and he mostly tries to buy them at a fair share price.

Unlike most other managers, Smithson Investment Trust does nothing after purchasing the companies, which is considered as an ideal aspect of investing over the long term.

The changes to the portfolio are not made on a regular basis, instead, they are made only when the manager thinks it is absolutely necessary to make those changes.

Some of such reasons are when a company’s value becomes too expensive to manage, the management team’s decisions are not effective, or they find an extremely lucrative opportunity elsewhere.

By following this strategy in a strict manner, Smithson Investment Trust has been able to select a portfolio of the top 25 to 40 (around 30 as of now) companies among the 5,000 stocks that exist.

This type of approach is said to be a high conviction strategy, which means each individual holding in the portfolio often has a considerable amount of impact on the performance of the investment trust.

This impact can either be positive or negative while increasing the risk involved while investing in this.

Smithson Investment Trust mostly invests in the developed markets while investing up to half (approx.) of the money in the United States.

Barnard also seeks to find successful ideas in European nations such as the UK, Denmark, Switzerland, etc.

Categorized on the basis of the sectors, this investment trust invests around 45% in the tech companies and 21% in the companies belonging to the Industrial sector.

There is denying the fact that the COVID 19 pandemic has greatly impacted the stock markets all over the world, out of which, certain sectors were highly impacted compared to other sectors.

Just as some sectors were not able to perform well, some sectors did perform well, regardless of the pandemic situation (such as healthcare).

Having considered the healthcare sector as a profitable one, the manager invested in the companies belonging to this sector and managed to make profits.

These profits were used to balance the holdings belonging to the sectors such as travel, leisure, industrial, etc., of which the prices experienced a downturn.

Along with balancing the value, this strategy also created a lucrative entry point for new holdings in the portfolio. Some of the new holdings that were added to the portfolio were as follows.

“Rational”, a German oven manufacturer, was thought to be a long-term winner based on its implementation of cutting-edge technology.

Two cybersecurity companies namely “Qualys” and “Fortinet” were added into the portfolio, which was possible after the sale of an existing company in the portfolio named “Check Point”.

  • Fundsmith Investment Culture

Fundsmith is a specialty fund group, which has offices located in Mauritius, London, and the United States, and was founded by Terry Smith in the year 2010.

This asset management company first launched their flagship Fundsmith Equity, after which, they’ve decided to develop their endeavors by launching a wide range of funds and investment trusts.

The investment philosophy of Fundsmith is considered to be lucrative by most investors, and the company has a lot of dedication towards its philosophy and investment approach.

The business is owned by Smith (who has the largest stake), the employees, and the managers who invest a considerable amount of money in the funds.

This includes the business and the funds that are managed on the basis of a long-term investment approach.

Usually, Fundsmith invests in the companies that are good with the aspects of ESG investing, yet they don’t have a strict implementation of investing by following the ESG rules.

In simple words, the investment approach of Fundsmith can be said to be one where the companies are a bit more conscious of the principles of ESG investing.

The corporate governance and the engagement of companies in their respective business activities often play a major role in analyzing the ownership structure of a company.

  • Costs

According to the stats we’ve obtained, the ongoing annual costs of the Smithson Investment Trust were 1%.

However, this might change by the time you read this article, and therefore, it is better to refer to the recent annual reports and accounts information, and other information regarding the risks as well as the changing structure.

If the trust is being held in a SIPP (Self-Invested Pension Plan) or ISA (Individual Savings Account), then there would be an additional platform fee depending on the provider.

For example, if you were holding a trust with the help of Hargreaves Lansdown, the platform charge would be 0.45%, which is capped at £200 in case of a SIPP and £45 in case of an ISA.

In most cases, you can avoid the platform fee by holding this investment trust with the help of a Fund and Share Account.

  • Performance and Investment approach

Since the launch in October 2018, Smithson Investment Trust has been providing robust returns and the fund price has risen around 62.5%.

It should be duly noted that the past performance of an investment asset should not be taken as an indicator for speculating its future performance because the past performance does not guarantee whether the price rises or falls.

You should only invest the amount of money, which won’t affect your financial situation if there were any subjective losses. It is possible that you might even end up losing most of the amount invested by you in the first place.

The year 2020 happened to be an extreme year, which allowed active managers to show their worth, which is exactly what Simon Barnard did.

From a period between March 2020 to the end of March 2021, the net asset value of Smithson Investment Trust increased more than 41.8% and the share price rose up to 43.4%, which is quite impressive.

Healthcare companies namely Ambu and Masimo were considered to be the fund’s best-performing companies in the year 2020, especially due to the COVID 19 situation.

Premium drinks manufacturer Fever-Tree plc. was also one of the top-performing companies of Smithson Investment Trust’s portfolio.

Why? Because most people would usually love to have a nice drink or two regularly, especially when they aren’t allowed outside because of the lockdown or because of the restrictions imposed on bars.

Other noteworthy companies in this portfolio that performed well, regardless of the COVID 19 scenario, were Domino’s Pizza Enterprises and IPG Photonics.

A company that wasn’t able to perform well because of the pandemic situation was Sabre, which is a company related to travel technology. Being a travel-related company, it can only earn profits when people travel much often.

Some other companies such as Temenos (a Swiss-based software company) and Rightmove (a UK-based real estate company) also exhibited poor performance.

This annual percentage growth of Smithson Investment Trust during the period between March 2019 to March 2020 was only 0.8%, yet it was 43.4% from March 2020 to March 2021.

The geographical distribution of the assets in which Smithson Investment Trust invested are as follows:

USA:                                     46.9%

UK:                                        20.8%

Australia:                           7.1%

Switzerland:                    6.7%

Denmark:                          5.9%

Germany:                          5.4%

Italy:                                     4%

New Zealand: 1.4%

The remaining 1.8% of the assets are invested in cash and the securities related to cash.

The top ten holdings of Smithson Investment Trust are as follows:

  • Sabre
  • Fever-Tree
  • Rightmove
  • Fortinet
  • Domino’s Pizza Enterprises
  • Temenos
  • Equifax
  • Recordati
  • Domino’s Pizza Group
  • Ansys

Just like any other fund or investment trust of Fundsmith, there are three fundamental rules of investment when it comes to Smithson Investment Trust.

Firstly, they always try to buy the shares of the best possible companies, such as companies with a good cash flow and the companies that are anticipated to have potential growth.

As we already discussed, they always try to invest in the companies by buying the shares at a fair price.

The third and most important thing they do after investing in a company is that they do nothing. Yes, they just purchase the stocks and hold them for the long term to get the anticipated returns.

Just to make sure that they don’t have to deal in losses, Smithson Investment Trust avoids investing in companies belonging to some specific types of sectors, which have been provided below.

  • Banks
  • Real Estate
  • Industries that opt for higher leverage, meaning they borrow more than usual so as to obtain profits.
  • Cyclical sectors
  • Competitive sectors such as automobiles or airlines, which might be profitable for longer terms.
  • Benchmark of Smithson Investment Trust

The benchmark index of Smithson Investment Trust is the “MSCI World SMID index”, where SMID represents the small and mid-cap companies.

This index allows Smithson Investment Trust to have a broad geographical exposure because the index covers around 23 countries and more than 5,000 stocks belonging to various types of developed markets.

With the help of their investment strategy, Fundsmith narrows down the list to just 83 companies that belong to their choice of investments. Usually, Fundsmith invests only in half of these companies, which are anticipated to provide higher returns.

Is it possible for Smithson Investment Trust to beat the performance of the benchmark index?

This might be an actual thought among most investors, especially those who are trying to compare the benchmark index with Smithson Investment Trust.

Well, we have to consider the fact that Smithson Investment Trust is being run by Terry Smith, who is not just the founder/CEO of Fundsmith, but he also happens to be a highly skilled investor.

If anyone could come up with an investment strategy that is good enough to beat the index net of fees, then it is definitely going to Terry Smith who has all the necessary investment skills and expertise.

Bottom Line:

Investing in the Smithson Investment Trust can be a good choice for the investors because the investment trust has been performing well lately, despite the COVID 19 situation going on all over the world.

You might be wondering that we always say that past performance is not an indicator for determining the growth of an investment asset, yet why are we saying this.

Well, we are not telling you to look at the past performance, instead, we are telling you that the investment trust was able to perform well regardless of the Coronavirus situation that has become a reason for the downfall for most stock markets.

However, small and mid-cap companies do have a large potential for growth over the long term, but the risk involved with them is also significant.

It is a better idea to diversify your investment portfolio by investing in the Smithson Investment Trust, yet you must not rely only on the respective investment trust.

A well-diversified portfolio will always come in handy for investors, especially when they are looking for higher returns.

In most cases, people find it hard to determine the assets for their portfolio or they might not be able to take care of their investments effectively.

If you fall under such a category, you can acquire the financial solutions offered by us such as investment planning, wealth management, and financial advice by clicking here.

You can also know more about the fundamentals of investments so that one day you can take care of all your investment needs on your own.

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That being said, we hope that this article was helpful to you in knowing all the details about Smithson Investment Trust.

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