Smithson investment trust IPO target more than doubled to £600 million

Smithson, the brainchild of veteran investor Terry Smith, has increased the amount of shares available to investors before the trust's launch. If successful, it will be one of largest trust IPOs in UK history, writes Tom Bailey.

Interest in Smithson investmenttrust appears to be picking up, with the trust's board announcing an increase in shares on offer to investors before launch, more than doubling its original fundraising amount.

The brainchild of veteran investor Terry Smith, Smithson was originally aiming to raise £250 million. The amount of shares offered to investors in the subscription stage has now been increased by 35 million to 60 million at £10 each, leading to a launch target of £600 million.

The trust will attempt to apply the successful investment philosophy of Smith's Fundsmith Equity fund, but instead focus on global smaller companies deemed too small for the original Fundsmith.

Money Observer, interactive investor's sister website, recently quizzed Smith about the original seemingly small launch size of Smithson when compared to £17 billion under management by Fundsmith Equity.

While Smithson's new launch target is still way below the Fundsmith Equity's mammoth £17 billion (as an open-ended fund, Fundsmith Equity is able to see greater inflows), raising £600 million would put Smithson way ahead of other new trust's launched this year.

According to figures from the Association of Investment Companies, there were seven new launches in the first half of 2018, raising a collective £759 million.

The second half of 2018 also saw the high-profile launch of Mark Mobius' Mobius Investment Trust. Despite Mobius' reputation and wide press coverage, the trust was only able to raise half of its £200 million launch target.

Too big to fail?

Raising £600 million would put Smithson among one of the largest investment trust launches in UK history.

Such strong initial interest at launch, however, has not always worked out well for investment trusts.

The title for the largest amount ever raised at launch for an investment trust is held by Neil Woodford's Woodford Patient Capital Trust, which raised £800 million in 2015. The trust has since seen less than stellar performance, with a number of investments failing to pay off.

As of October 2018, the trust's share price was down by around 16% since making its stockmarket debut.

• Neil Woodford: A fresh look at Patient Capital Trust

The previous record holder Mercury European Privatisation, which raised £549 million in 1994. Within five years waning performance forced the trust to completely overhaul its investment remit before ultimately winding up in 2004, just a decade after its initial launch.

Smithson's subscription period ends at 11am on 12 October.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.