Sanford Deland fund manager Keith Ashworth-Lord has panned the UK government’s response to the coronavirus as the Buffettology Smaller Companies investment trust abandons its £100m IPO amid lockdown chaos.
The UK smaller companies investment trust announced in a regulatory filing on Monday morning it would not be launching at the current time. It comes a month after SDL formally confirmed its plans for the Buffettology Smaller Companies IPO.
At the end of September, three UK focused investment trusts were collectively targeting £450m to get off the ground, but now only the Schroders British Opportunities trust remains, after the Tellworth British Recovery & Growth Trust pulled its IPO at the start of the month.
Ashworth-Lord said it was “very clear what happened” to Buffettology Smaller Companies laying the blame firmly on the government’s handling of the coronavirus lockdown.
“The first couple of weeks things were going really well,” he told Portfolio Adviser. “We got some really decent pledges. We actually thought we were going to smash £100m such was the response we were getting.”
But he said the pledges immediately dried up when Boris Johnson introduced a three-tiered lockdown in England. “The whole thing started to go a little off the boil.” The change in fortunes for the investment trust was so significant he could pin a date on it, 13 October, a day after Johnson’s announcement.
Matters were only compounded when the UK government started facing off with mayors around the country, the Manchester-based fund manager said. Greater Manchester mayor Andy Burnham engaged in the most public stand-off with Johnson over whether the region would enter tier-three lockdown.
“It was like the final straw for confidence. And what we started to see was not just pledges drying up but actually orders being pulled.”
The Buffettology Smaller Companies investment trust ended last week with less money committed to the IPO than it had had at the start.
“I blame this fairly and squarely on government communications and its response to what’s going on.” He added: “The strategy’s not coherent. The economic damage they’ve done now, I just think it’s terrible.”
But the implications aren’t limited to his investment trust, he says.
“What really, really concerns me more than SDL or the Buffettology trust is that I think we are just a microcosm for what’s happening out there in the real economy. Confidence was already low, and it’s just been shattered by what’s happened.”
He would like the government to stop its mixed messaging, stating the public hasn’t got a clue what restrictions are in place.
“Even the Manchester Police here are saying they can’t police this because people don’t know what restrictions are. It’s mixed messaging and people just don’t know whether they’re coming or going.”
The pulled Buffettology Smaller Companies IPO follows the failed launch of the Tellworth British Recovery & Growth Trust earlier this month, before the government stepped up lockdown measures.
The failure of that investment trust IPO was blamed on negative sentiment towards the UK due to Brexit, the coronavirus and poor recent market performance. Nevertheless, at the time, Buffettology was thought to have a stronger chance of getting off the ground due to its stronger following among retail investors.
In September, Schroders also announced it planned to launch a UK equities investment trust, albeit one that would have the ability to buy into private markets. Schroders says it remains committed to the Schroders British Opportunities investment trust, which is targeting £250m, and would update the markets with a prospectus in due course.
Ashworth-Lord said a future launch of the Buffettology Smaller Companies investment trust remains on the table.
“All the work has been done, all the legal work and getting everything together, it’s just sat there now and sitting in the drawer. All is not lost by any means, it’s just disappointing.”
See also: Spate of contrarian investment trust IPOs after coronavirus drought stuns investors
