SMITHSON (SSON) – Investment Trusts
| Price: £16.33 +6.9% | NAV: £16.81 |
| Market Cap: £1.87bn | Yield: 0.4% |
Smithson, the closed-end fund focused on capital growth by investing in high-quality small and medium-sized companies, sprung a major surprise on the market this morning by announcing it would switch to an open-ended structure.
The reason for the move is to eliminate the ‘entrenched’ discount to NAV (net asset value) which has dogged the fund almost since inception.
The new fund will continue to be run by Fundsmith, with Simon Barnard as portfolio manager, there is no dilution or capital gains charge for shareholders who want to roll their shares over into the new fund, and for those who want to exit there will be the option to sell at or close to NAV with Fundsmith covering some of the costs.
Our View
This is a neat solution to eliminating the discount, as share buybacks clearly haven’t worked. Since April 2022, Smithson has spent almost £1 billion buying back 69.6 million shares or nearly 40% of the issued capital, with no meaningful impact.
Whether this prompts more closed-end funds to do the same will be interesting to see. One of the benefits of being a closed-end fund is not having to worry about redemptions (people taking their money out), but given Smithson’s £1.87 billion market cap that’s unlikely to be a problem.
Read the press release here: https://www.smithson.co.uk/
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