Terry Smith buys £1m of shares after stepping back from trust

Star manager buys stock as discount on emerging markets trust widens

Smith

Terry Smith (pictured) has loaded up on £1m worth of shares in his Fundsmith Emerging Equities Trust (Feet) after announcing he will step back from the running the investment company.

The Fundsmith chief executive purchased 82,000 shares in Feet at £12.05 per share, according to a RNS filing on Wednesday.

He now owns 662,000 shares or a 2.49% stake in the trust.

Smith has been gradually building up his stake in Feet, investing £504,000 into the investment company last October. But he has poured far more money into his £17.6bn flagship Fundsmith Equity fund and his newest trust, Smithson, which shattered the record for the highest UK-domiciled closed-ended fund launch last October.

The £321m trust was trading at a discount of 2.10% on Wednesday when Smith snapped up his additional shares, data from Trustnet shows.

The trust’s share price sank by 33p (2.7%) on the day after Smith’s announcement he would be handing over control of the trust to Michael O’Brien and Sandip Patodia.

The board said the Fundsmith boss will continue to provide advice and support to the pair as the trust’s CIO. It also agreed to slice the annual management fee on the trust from 1.25% to 1% which will come into effect on 31 May 2019.

The dual announcements were revealed ahead of the investment company’s AGM on Wednesday afternoon.

Shareholders approved all 13 resolutions that were put before them, including the director’s remuneration report which passed with 99.93% of the votes.

Feet has traded reasonably close to NAV over the last few years despite underperforming the broader IT Global Emerging Markets sector which AJ Bell’s head of active portfolios Ryan Hughes believes shows how “powerful the pull of the Terry Smith name has been”.

3m6m1yr3yr
Fundsmith Emerging Equities Trust-1.873.82-3.0623.16
IT Global Emerging Markets-0.887.16-0.7639.92
MSCI Emerging Markets-3.243.95-5.9254.84
Source: FE Analytics; total returns in GB

Since it was launched in June 2014 Smith’s trust has returned 20.69%, half as much as the MSCI Emerging Markets Index’s 42.90%.

Over that time period it has also trailed behind larger rivals JP Morgan Emerging Markets Investment Trust and the Templeton Emerging Markets Investment Trust (Temit) which have returned 78.72% and 44.66% respectively.

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