Smithson Annual Report

[dundas666]

I have no idea of the reliability of the discount because we do not really know whether the NAV is reasonable or not.

Dod

I'm not sure what you mean by this? The NAV is declared every morning in a RNS for all to see. All of the holdings are fully listed $1Bn dollar plus companies, so the NAV is easy to calculate once you account for currency exchange rates. Smithson doesn't hold any dodgy unlisted companies like some other trusts. I bought some more yesterday having quickly looked again at all the current holdings. Apart from Sabre all of the them are very high quality profitable companies with excellent gross margins. Many were overpriced but are looking a lot more reasonably valued now. I plan to double my holding in SSON over the next 6-12 months.

I would be very tempted to as well. But I already have too big a proportion. Eggs and baskets and all that.......

I have to say, I know nothing about the Sabre company. Some of the good quality SSON holdings like Spirax Sarco, Ansys etc... I am quite familiar with, but not Sabre.

Sabre is in the same business as the Spanish company Amadeus (held by the main Fundsmith Equity Fund). It provides software for travel booking so was very badly effected by the pandemic. Rather than sell, Smithson doubled down I believe at $3 and it is now one of the largest holdings. It should do well as travel returns to normal but profits were down 90% and the balance sheet took a hit.

BTW the video of the AGM held on 3rd May is now up on the website: https://www.smithson.co.uk/tv
All the best, Si

Whenever I see mention of a company called Sabre it always reminds me they took over Dunder Mifflin in the American version of The Office
https://www.youtube.com/watch?v=Ie9S5EJctak

[simoan]

In recent years, many trust Boards have shown much greater independence than they used to, by sacking managers and finding news ones, negotiating reductions in fees charged, agreeing changes to the manager's mandates and so on. Even a Witan trust, Witan Pacific, not only changed manager but then adopted the name of Baillie Gifford China. That would have been unheard of a few years ago. None of that is likely to happen with Smithson (or Fundsmith for that matter). It may not matter but it is not healthy I think to nail only the colours of Terry Smith to your mast. We have in recent years seen where reliance on one rather egocentric manager can lead.

Dod

In which case, I wonder why you invested in the first place! High fees, star manager - doesn't sound like your thing at all

I suspect the answer is, that like me, you have plenty of other investments if this one proves vulnerable.

Well of course as is well known selling is the difficult bit. I sold some Scottish Mortgage on five occasions on its way from around £6 up to just over £14, but it was and remains a big holding. I hold it and held Smithson for only one reason and that is a capital gain. SMT is a big well known and well managed trust and I know Baillie Gifford pretty well. I cannot say the same of Smithson and in any case I am not sure that small companies, however good they are on paper, are going to do much in the near future. I should have sold when I started this thread in March but allowed myself to be influenced by the subsequent comments. I suppose I invested in the first place for FOMO.

Dod

Actually, you've just triggered the thought that I might better off putting spare cash in the way of SMT rather than SSON. At least there's a longer track record, though my thoughts on SSON have been "preconditioned" by my holding in Fundsmith equity, which has been advancing very well for several years.

This all, one might observe, goes against my usual trend on investing for income - but I do keep other irons in the fire too.

Arb.

Wow! I find some of the comments by Dod on this thread really quite bizarre, and worst of all, factually incorrect. Firstly, Terry Smith has nothing to do with Smithson other than as an investment adviser to the Fund Manager. He also has a significant sum of his own money invested in it; so he has plenty of skin in the game, which makes him the person who should be most concerned by Corporate Governance. Secondly, he states "we have in recent years seen where reliance on one rather egocentric manager can lead." which undoubtedly relates to Woodford. This comparison is so ridiculous it is painful and embarrassing. And then to put the cherry on the top he states a preference for Scottish Mortgage IT.

So, let's start with some facts. Scottish Mortgage also had a star fund manager who didn't exactly have the smallest ego in the world who has recently retired - I suspect the timing of which will likely turn out to be very opportune, getting out near the top with his reputation intact. If anything he appeared in the financial press more often than Terry Smith.

Smithson currently holds 32 smaller global companies based on a defined process that is familiar across all Fundsmith investment products - "Find Good Companies, Don't Overpay, Do Nothing". All of these companies are listed on stock markets and can be freely traded by anyone with a good brokerage account if they so wish. It has a highly focussed approach which leads to only 30 or so holdings and covers a wide range of industries, unlike Scottish Mortgage which is a bit of a mish-mash with 70+ holdings and is essentially a Technology IT holding some of the very largest companies in the world. So any comparisons between the two are, frankly, ridiculous. They are two very different beasts.

And most importantly of all, lest we forget (it seems Dod has!) the root cause of the problem with Woodford was his oversized exposure to small illiquid and unlisted shares which he was unable to offload when people wanted to redeem their investment. Dod has already incorrectly queried the veracity of the NAV of Smithson, which is totally accurate since all companies are fully listed and the NAV is published on the Smithson website everyday. I'm not sure why he didn't know this as a holder of Smithson until recently. The smallest company held within Smithson is around $2Bn market capitalisation, so liquidity should not be a problem if they wish to sell a holding. I assume the reason he questioned the accuracy of the NAV is because over 20% of Scottish Mortgage is held in unlisted companies, several based in China. If I had to point to an IT likely to have Woodford type problems I know which one I'd choose of the two.

See: https://www.theaic.co.uk/aic/news/cityw ... ity-values

All the best, Si

[Fluke]

In recent years, many trust Boards have shown much greater independence than they used to, by sacking managers and finding news ones, negotiating reductions in fees charged, agreeing changes to the manager's mandates and so on. Even a Witan trust, Witan Pacific, not only changed manager but then adopted the name of Baillie Gifford China. That would have been unheard of a few years ago. None of that is likely to happen with Smithson (or Fundsmith for that matter). It may not matter but it is not healthy I think to nail only the colours of Terry Smith to your mast. We have in recent years seen where reliance on one rather egocentric manager can lead.

Dod

In terms of funds yes I have rather nailed the colours of Smith to the mast, but they form about 15% of my overall investments so not as high risk as it might seem, and within that I further diversified by dividing the funds between the main Fundsmith equity fund and Smithson. I've been looking to introduce other ITs but I keep coming back to the Smith investment philosophy, rather than the man himself, simple to understand (if not to execute). I'm not happy about the costs either but he does often point out (and demonstrates) that the OGC's of some funds to which Fundsmith is often compared, don't always include dealing charges, if they did the comparisons are not be quite so unfavourable.

Re Woodford, Smith has spoken publicly about this a few times and explained how such shenanigans couldn't happen at Fundsmith. OK he would say that wouldn't he, but he does explain how their internal processes would prevent such a thing. A question for Smithson shareholders is, were he to fall under the proverbial bus tomorrow would there be a Julian Robins type person capable of taking over the reigns, possibly, I don't know.

[Arborbridge]

All the best, Si

Valuable contribution, Si, and all taken on board here.

I would add that Terry Smith is bound to have an outsize and enormous influence on SSON although he may not directly run it - but given his record that is no bad thing.


Arb.

[simoan]

In recent years, many trust Boards have shown much greater independence than they used to, by sacking managers and finding news ones, negotiating reductions in fees charged, agreeing changes to the manager's mandates and so on. Even a Witan trust, Witan Pacific, not only changed manager but then adopted the name of Baillie Gifford China. That would have been unheard of a few years ago. None of that is likely to happen with Smithson (or Fundsmith for that matter). It may not matter but it is not healthy I think to nail only the colours of Terry Smith to your mast. We have in recent years seen where reliance on one rather egocentric manager can lead.

Dod

I'm not happy about the costs either but he does often point out (and demonstrates) that the OGC's of some funds to which Fundsmith is often compared, don't always include dealing charges, if they did the comparisons are not be quite so unfavourable.

I should point out that the OCF for Smithson is completely in-line with Trusts in the Global Smaller Companies IT sector. It is not the highest and only very slightly above average according to the AIC website. I don't have a problem at all with them. You could have made the same assertion about Fundsmith Equity 10 years ago, and then where would I be? Probably invested in a rubbish but cheap fund and still working. In life, you have to pay up for quality. You'll never get a Ferrari for Ford money.

[Spet0789]

In recent years, many trust Boards have shown much greater independence than they used to, by sacking managers and finding news ones, negotiating reductions in fees charged, agreeing changes to the manager's mandates and so on. Even a Witan trust, Witan Pacific, not only changed manager but then adopted the name of Baillie Gifford China. That would have been unheard of a few years ago. None of that is likely to happen with Smithson (or Fundsmith for that matter). It may not matter but it is not healthy I think to nail only the colours of Terry Smith to your mast. We have in recent years seen where reliance on one rather egocentric manager can lead.

Dod

In which case, I wonder why you invested in the first place! High fees, star manager - doesn't sound like your thing at all

I suspect the answer is, that like me, you have plenty of other investments if this one proves vulnerable.

Well of course as is well known selling is the difficult bit. I sold some Scottish Mortgage on five occasions on its way from around £6 up to just over £14, but it was and remains a big holding. I hold it and held Smithson for only one reason and that is a capital gain. SMT is a big well known and well managed trust and I know Baillie Gifford pretty well. I cannot say the same of Smithson and in any case I am not sure that small companies, however good they are on paper, are going to do much in the near future. I should have sold when I started this thread in March but allowed myself to be influenced by the subsequent comments. I suppose I invested in the first place for FOMO.

Dod

Actually, you've just triggered the thought that I might better off putting spare cash in the way of SMT rather than SSON. At least there's a longer track record, though my thoughts on SSON have been "preconditioned" by my holding in Fundsmith equity, which has been advancing very well for several years.

This all, one might observe, goes against my usual trend on investing for income - but I do keep other irons in the fire too.

Arb.

Wow! I find some of the comments by Dod on this thread really quite bizarre, and worst of all, factually incorrect. Firstly, Terry Smith has nothing to do with Smithson other than as an investment adviser to the Fund Manager. He also has a significant sum of his own money invested in it; so he has plenty of skin in the game, which makes him the person who should be most concerned by Corporate Governance. Secondly, he states "we have in recent years seen where reliance on one rather egocentric manager can lead." which undoubtedly relates to Woodford. This comparison is so ridiculous it is painful and embarrassing. And then to put the cherry on the top he states a preference for Scottish Mortgage IT.

So, let's start with some facts. Scottish Mortgage also had a star fund manager who didn't exactly have the smallest ego in the world who has recently retired - I suspect the timing of which will likely turn out to be very opportune, getting out near the top with his reputation intact. If anything he appeared in the financial press more often than Terry Smith.

Smithson currently holds 32 smaller global companies based on a defined process that is familiar across all Fundsmith investment products - "Find Good Companies, Don't Overpay, Do Nothing". All of these companies are listed on stock markets and can be freely traded by anyone with a good brokerage account if they so wish. It has a highly focussed approach which leads to only 30 or so holdings and covers a wide range of industries, unlike Scottish Mortgage which is a bit of a mish-mash with 70+ holdings and is essentially a Technology IT holding some of the very largest companies in the world. So any comparisons between the two are, frankly, ridiculous. They are two very different beasts.

And most importantly of all, lest we forget (it seems Dod has!) the root cause of the problem with Woodford was his oversized exposure to small illiquid and unlisted shares which he was unable to offload when people wanted to redeem their investment. Dod has already incorrectly queried the veracity of the NAV of Smithson, which is totally accurate since all companies are fully listed and the NAV is published on the Smithson website everyday. I'm not sure why he didn't know this as a holder of Smithson until recently. The smallest company held within Smithson is around $2Bn market capitalisation, so liquidity should not be a problem if they wish to sell a holding. I assume the reason he questioned the accuracy of the NAV is because over 20% of Scottish Mortgage is held in unlisted companies, several based in China. If I had to point to an IT likely to have Woodford type problems I know which one I'd choose of the two.

See: https://www.theaic.co.uk/aic/news/cityw ... ity-values

All the best, Si

A further crucial distinction between Woodford and SSON/SMT is structure.

Woodford had, unforgivably, put illiquid assets into a daily liquidity OEIC.

SSON (and FEET) and SMT are closed ended. They will never be forced to sell a position by investor outflows. In the case of Fundsmith’s trusts this was a deliberate decision. He recognised that less liquid stocks can only be safely held in a closed-end structure.

[doug2500]

I just can't imagine Terry being that hands off at Smithson, even if he officially is. But I also don't worry too much about him being hit by a bus, I think the manager is probably up to the job.

I also think the main fund probably has some solid people there too, but I do worry (a small bit) about a sudden irrational knee jerk reaction to any bus hitting.

I don't think there's any comparison between Woodford and either Smith vehicle. It was the combination of illiquid holdings and an open ended fund that did for Woodford. Neither Fundsmith, Smithson or SMT have this combination.

I really prefer the IT structure partly for this reason, and also for instant trading and the ability to concentrate on holdings not redemptions. Keith A-L of Buffetology writes quite often these days about having to manage cash, it would be much better if he could just manage the holdings (my words not his)

[simoan]

I don't think there's any comparison between Woodford and either Smith vehicle. It was the combination of illiquid holdings and an open ended fund that did for Woodford. Neither Fundsmith, Smithson or SMT have this combination.

I really prefer the IT structure partly for this reason, and also for instant trading and the ability to concentrate on holdings not redemptions. Keith A-L of Buffetology writes quite often these days about having to manage cash, it would be much better if he could just manage the holdings (my words not his)

Agreed. But there has to be a question mark over the true NAV of Scottish Mortgage. You'd need to understand how the unlisted companies are valued. If it uses a DCF model you can imagine what is currently happening under the bonnet with the USD based discount rate going through the roof and the currency strengthening. I wouldn't touch it with ten bargepoles appended tbh due to this very obvious lack of transparency.

I've always liked the approach of Keith A-L in the Buffetology fund but decided I could easily invest myself in the same type of companies (Bioventix, Games Workshop etc.) and never felt an OEIC was the correct vehicle for it's mandate. It should really be an IT. I have noticed recently a number of sales RNSes which indicate they are maybe funding redemptions. Actually, I'm watching his selling down of RM like a hawk as I do not believe this is based on the fundamentals of the company. When an institutional investor is a forced seller of a small cap like this it's normally a great time to invest!

All the best, Si

[simoan]

All the best, Si

I would add that Terry Smith is bound to have an outsize and enormous influence on SSON although he may not directly run it - but given his record that is no bad thing.

Arb.

It doesn't really matter whether he has involvement or not. Corporate Governance is a purely legal matter. From a legal standpoint there is absolutely nothing wrong and it has not changed since Smithson was launched. Using it as an excuse for selling out now is just silly.

[Dod101]

[
Wow! I find some of the comments by Dod on this thread really quite bizarre, and worst of all, factually incorrect. Firstly, Terry Smith has nothing to do with Smithson other than as an investment adviser to the Fund Manager. He also has a significant sum of his own money invested in it; so he has plenty of skin in the game, which makes him the person who should be most concerned by Corporate Governance. Secondly, he states "we have in recent years seen where reliance on one rather egocentric manager can lead." which undoubtedly relates to Woodford. This comparison is so ridiculous it is painful and embarrassing. And then to put the cherry on the top he states a preference for Scottish Mortgage IT.

So, let's start with some facts. Scottish Mortgage also had a star fund manager who didn't exactly have the smallest ego in the world who has recently retired - I suspect the timing of which will likely turn out to be very opportune, getting out near the top with his reputation intact. If anything he appeared in the financial press more often than Terry Smith.

Smithson currently holds 32 smaller global companies based on a defined process that is familiar across all Fundsmith investment products - "Find Good Companies, Don't Overpay, Do Nothing". All of these companies are listed on stock markets and can be freely traded by anyone with a good brokerage account if they so wish. It has a highly focussed approach which leads to only 30 or so holdings and covers a wide range of industries, unlike Scottish Mortgage which is a bit of a mish-mash with 70+ holdings and is essentially a Technology IT holding some of the very largest companies in the world. So any comparisons between the two are, frankly, ridiculous. They are two very different beasts.

And most importantly of all, lest we forget (it seems Dod has!) the root cause of the problem with Woodford was his oversized exposure to small illiquid and unlisted shares which he was unable to offload when people wanted to redeem their investment. Dod has already incorrectly queried the veracity of the NAV of Smithson, which is totally accurate since all companies are fully listed and the NAV is published on the Smithson website everyday. I'm not sure why he didn't know this as a holder of Smithson until recently. The smallest company held within Smithson is around $2Bn market capitalisation, so liquidity should not be a problem if they wish to sell a holding. I assume the reason he questioned the accuracy of the NAV is because over 20% of Scottish Mortgage is held in unlisted companies, several based in China. If I had to point to an IT likely to have Woodford type problems I know which one I'd choose of the two.

See: https://www.theaic.co.uk/aic/news/cityw ... ity-values

All the best, Si

When you have something new to tell me please let me know. Terry Smith has nothing to do with Smithson? His name is incorporated in the name of the IT, and he just happens to own the fund manager. 'Nothing to do with me' is just a nonsense. And I am sure he could not care less about the corporate governance, since Smithson has just enough to comply with the requirements to be an IT.

I am not comparing Smithson with Scottish Mortgage. Of course they are entirely different but they are both growth ITs and it seems to me to be perfectly fair to compare the different ways that they are trying to achieve that. James Anderson was never under any circumstances, a 'star' manager. He would I am sure have simply laughed that off. I was going to say he would be appalled but I don't think he would , merely scornful of the very idea. It is simply not in the culture of Baillie Gifford to have 'star' managers. Shows how much Simeon knows about them.

Dod

[simoan]

[
Wow! I find some of the comments by Dod on this thread really quite bizarre, and worst of all, factually incorrect. Firstly, Terry Smith has nothing to do with Smithson other than as an investment adviser to the Fund Manager. He also has a significant sum of his own money invested in it; so he has plenty of skin in the game, which makes him the person who should be most concerned by Corporate Governance. Secondly, he states "we have in recent years seen where reliance on one rather egocentric manager can lead." which undoubtedly relates to Woodford. This comparison is so ridiculous it is painful and embarrassing. And then to put the cherry on the top he states a preference for Scottish Mortgage IT.

So, let's start with some facts. Scottish Mortgage also had a star fund manager who didn't exactly have the smallest ego in the world who has recently retired - I suspect the timing of which will likely turn out to be very opportune, getting out near the top with his reputation intact. If anything he appeared in the financial press more often than Terry Smith.

Smithson currently holds 32 smaller global companies based on a defined process that is familiar across all Fundsmith investment products - "Find Good Companies, Don't Overpay, Do Nothing". All of these companies are listed on stock markets and can be freely traded by anyone with a good brokerage account if they so wish. It has a highly focussed approach which leads to only 30 or so holdings and covers a wide range of industries, unlike Scottish Mortgage which is a bit of a mish-mash with 70+ holdings and is essentially a Technology IT holding some of the very largest companies in the world. So any comparisons between the two are, frankly, ridiculous. They are two very different beasts.

And most importantly of all, lest we forget (it seems Dod has!) the root cause of the problem with Woodford was his oversized exposure to small illiquid and unlisted shares which he was unable to offload when people wanted to redeem their investment. Dod has already incorrectly queried the veracity of the NAV of Smithson, which is totally accurate since all companies are fully listed and the NAV is published on the Smithson website everyday. I'm not sure why he didn't know this as a holder of Smithson until recently. The smallest company held within Smithson is around $2Bn market capitalisation, so liquidity should not be a problem if they wish to sell a holding. I assume the reason he questioned the accuracy of the NAV is because over 20% of Scottish Mortgage is held in unlisted companies, several based in China. If I had to point to an IT likely to have Woodford type problems I know which one I'd choose of the two.

See: https://www.theaic.co.uk/aic/news/cityw ... ity-values

All the best, Si

When you have something new to tell me please let me know. Terry Smith has nothing to do with Smithson? His name is incorporated in the name of the IT, and he just happens to own the fund manager. 'Nothing to do with me' is just a nonsense. And I am sure he could not care less about the corporate governance, since Smithson has just enough to comply with the requirements to be an IT.

I am not comparing Smithson with Scottish Mortgage. Of course they are entirely different but they are both growth ITs and it seems to me to be perfectly fair to compare the different ways that they are trying to achieve that. James Anderson was never under any circumstances, a 'star' manager. He would I am sure have simply laughed that off. I was going to say he would be appalled but I don't think he would , merely scornful of the very idea. It is simply not in the culture of Baillie Gifford to have 'star' managers. Shows how much Simeon knows about them.

Dod

I'm sorry you don't like being hit with facts but that's all that counts with regard to making money, as opposed to the idle speculation you employ in your arguments. Who cares whether Terry Smith has any involvement or not in Smithson? That is just speculation. All that matters is the investment process and taking a long-term view. So you sold out, that's fine, let it be and move on... but oh no, you have to come out with speculation and untruths driven by the confirmation bias of your decision and dislike of Terry Smith. I find that ridiculous frankly for making informed investment decisions. FWIW I don't really like him either (a Brexit voting tax exile) but that's irrelevant to my investments with Fundsmith.

And if you can't even be bothered to get my username right, which is frankly disrespectful, I will end the conversation here.

[Dod101]

[
I'm sorry you don't like being hit with facts but that's all that counts with regard to making money, as opposed to the idle speculation you employ in your arguments. Who cares whether Terry Smith has any involvement or not in Smithson? That is just speculation. All that matters is the investment process and taking a long-term view. So you sold out, that's fine, let it be and move on... but oh no, you have to come out with speculation and untruths driven by the confirmation bias of your decision and dislike of Terry Smith. I find that ridiculous frankly for making informed investment decisions. FWIW I don't really like him either (a Brexit voting tax exile) but that's irrelevant to my investments with Fundsmith.

And if you can't even be bothered to get my username right, which is frankly disrespectful, I will end the conversation here.

I am sorry about your user name. It was not that I could not be bothered but I thought I had it correct. I see that I was wrong for which I apologise. I think you were the one being aggressive. As I said I am well aware of your points but I am not going to contribute any more to this thread (or at least to this discussion anyway) I wish you well but I will leave this matter at least pro tem.

Dod

[scotia]

Woodford had, unforgivably, put illiquid assets into a daily liquidity OEIC.

I know its deviating from the thread, but could I just mention that the oft reported problems with Woodford and the OEIC structure needs some clarification. Customers of Woodford's OEIC received back around 70% of the initial price from its liquidation, while around the same time the Woodford IT languished at around 30% of its initial price (and is currently now even lower in its SUPP guise). Neither structure provided full protection from a poor investment policy - but it does seem that the OEIC provided better protection than the IT.
I should perhaps add that I am a holder of Fundsmith (OEIC), Smithson (IT), Baillie Gifford Pacific (OEIC) and SMT (IT) among other OEICs, ETFs and ITs. And I'll just wait patiently for good times to return.

[doug2500]

I think I have to disagree with you on clarification, the oeic returned more money purely because of the underlying investments not the structure.

The IT was a terrible investment (I still have it!) but at least it remained trade-able. The whole thing was a disaster and the forced selling from the oeic didn't help the IT, but if it had also held all the large liquid stocks of the oeic it too would have probably returned a result closer to 70%.

One had major liquidity issues and some poor investment for a small part of it's holdings, the other was just poor investment. Nothing will protect you from bad investments.

[scotia]

I think I have to disagree with you on clarification, the oeic returned more money purely because of the underlying investments not the structure.

The IT was a terrible investment (I still have it!) but at least it remained trade-able. The whole thing was a disaster and the forced selling from the oeic didn't help the IT, but if it had also held all the large liquid stocks of the oeic it too would have probably returned a result closer to 70%.

One had major liquidity issues and some poor investment for a small part of it's holdings, the other was just poor investment. Nothing will protect you from bad investments.

The OEIC structure, with its need for liquidity, constrained how wild the risks Woodford could take. The IT didn't.
So the OEIC owners suffered only a loss of 30% - hardly a disaster. But constantly I hear reported the disaster of Woodford and the OEIC - but barely a whisper about the IT. For example the ShareSoc Newsletter of October 2021 had a front page entitled "The True Cost of the Woodford Debacle". It claimed it was campaigning

to try and get justice for the 270,000 investors who lost money through the closure of the £3.7 billion open-ended Woodford Equity income fund.

But nothing about the much larger losses with the IT.
It quoted research commissioned by the Association of Investment Companies (which promotes ITs) - one excerpt is

One respondent said she will have to work two extra years to make up the loss

. But no mention as to how many years she would have to work if she had chosen the IT.

I did not own either of the Woodford funds.
But getting back roughly to the subject, I must have a look at the Baillie Gifford ITs and their matching (approx) OEICS. It may be interesting to see how they compare on the up and the down of the markets.

[simoan]

Talking of the difference between OEIC and IT structures IMO one of the most important is that ITs can use gearing. Perhaps this was a contributing factor to the Woodford IT coming out worst versus the OEIC? I have no idea as I always had Woodford down as a lucky idiot and never followed his funds.

Of course, use of gearing can boost returns in a rising market but also increase losses in a falling market. When I looked at it today the AIC website was showing the gearing of SMT at 15%. That seems a little high to me and is yet another danger sign along with the valuation of unlisted securities. By contrast, Smithson has no gearing.

All the best, Si

[mc2fool]

Woodford had, unforgivably, put illiquid assets into a daily liquidity OEIC.

I know its deviating from the thread, but could I just mention that the oft reported problems with Woodford and the OEIC structure needs some clarification. Customers of Woodford's OEIC received back around 70% of the initial price from its liquidation, while around the same time the Woodford IT languished at around 30% of its initial price (and is currently now even lower in its SUPP guise). Neither structure provided full protection from a poor investment policy - but it does seem that the OEIC provided better protection than the IT.

Didn't he sell a lot of the dodgier holdings in the OEIC to the IT to get below some of the OEIC regulatory thresholds?

[BullDog]

Woodford had, unforgivably, put illiquid assets into a daily liquidity OEIC.

I know its deviating from the thread, but could I just mention that the oft reported problems with Woodford and the OEIC structure needs some clarification. Customers of Woodford's OEIC received back around 70% of the initial price from its liquidation, while around the same time the Woodford IT languished at around 30% of its initial price (and is currently now even lower in its SUPP guise). Neither structure provided full protection from a poor investment policy - but it does seem that the OEIC provided better protection than the IT.

Didn't he sell a lot of the dodgier holdings in the OEIC to the IT to get below some of the OEIC regulatory thresholds?

Yes he did. He also listed a new company in Guernsey which owned a lot of his unlisted rubbish to try to circumvent regulations. If I recall correctly, the Guernsey regulator saw through the scam and blocked it. That bit is from memory but it worked out something along those lines. I agree with the sentiment that Woodford was a dangerous idiot who believed his own hype. I am angry that he and his business buddy made millions out of innocent small investors and have got away scott free with it. He should have been locked away like Madoff was.

[scotia]

Getting back to Smithson - I thought it might be useful to compare its performance with Edinburgh Worldwide - an IT from Baillie Gifford in a similar area (Global Smaller Companies). Also, knowing that this is a historically volatile area, I wondered if an OEIC would prove less volatile - so I also looked at Global Discovery - a Baillie Gifford OEIC which is a close relation to Edinburgh Worldwide IT.
Looking at the Total Return Graphs (from HL) over the past 3 Years (Simthson doesn't yet have a 5 year history) we have



All have fallen significantly since late Autumn 2021. The pair of Baillie Gifford funds have been significantly more volatile than Smithson, and reached much greater heights, but, on a 3 year basis, are now below Smithson.
Over the past year, Smithson initially sold at a premium of around 2%, but has recently fallen rapidly to a discount of around 10%. Edinburgh Worldwide also started a year ago with a premium around 2%, and is now at a discount around 12%. So over the past few months I thought that this would have significantly favoured the OEIC - but this does not appear to have happened. I'm puzzled.
Where now? (I own all three). If I had a Crystal Ball that would accurately predict a swift upturn in Global Small Cap, then I would grab Edinburgh WorldWide and/or Smithson at their current significant discounts. But I don't possess such a device. So I think I'll adopt a policy of Masterly Inactivity.

[simoan]

Over the past year, Smithson initially sold at a premium of around 2%, but has recently fallen rapidly to a discount of around 10%. Edinburgh Worldwide also started a year ago with a premium around 2%, and is now at a discount around 12%. So over the past few months I thought that this would have significantly favoured the OEIC - but this does not appear to have happened. I'm puzzled.
Where now? (I own all three). If I had a Crystal Ball that would accurately predict a swift upturn in Global Small Cap, then I would grab Edinburgh WorldWide and/or Smithson at their current significant discounts. But I don't possess such a device. So I think I'll adopt a policy of Masterly Inactivity.

I don't follow IT's generally and have never come across Edinburgh Worldwide but the list of top 10 holdings has just made me wonder where I left my bargepole. It has a completely different approach to Smithson i.e. it is completely unfocussed and seems a mish-mash of really quite speculative stuff. It's no wonder it is volatile and can hold a large percentage of unlisted securities. Here's the EW blurb:

The Trust aims for capital growth from a global portfolio of initially immature entrepreneurial companies, typically with a market capitalisation of less than $5bn at time of initial investment, which are believed to offer long-term growth potential (over at least five years). The portfolio does not seek to track the comparative index, hence a degree of volatility against companies index is inevitable. A spread of risk is achieved by having 75–125 companies, with exposure to a minimum of six countries and 15 industries. The Trust is actively managed and will primarily consist of listed companies although up to 25% of total assets can be invested, at the time of initial investment, in private companies.

Terry Smith wold be turning in his grave... if he was dead! I've just ordered another 10 bargepoles from Amazon.
All the best, Si