Fundsmith plans emerging market investment trust

Emerging markets signFundsmith, a UK investment firm that markets itself aggressively on low costs, is to launch an emerging markets investment trust that uses the same strategy as its existing Fundsmith Equity Fund, which invests in Europe and North America.

Scheduled to launch later this year, the Fundsmith Emerging Equities Trust will focus on consumer stocks.

In a letter to shareholders, Terry Smith, chief executive officer of the asset manager, says there is an established trend for the emergence of consumer classes in emerging markets.

Smith says he and his team have identified an investable universe of over 150 companies for the investment trust, many of which are quoted subsidiaries, associates or franchises of companies that are researched for the existing Fundsmith Equity Fund.

“This also helps with the corporate governance issues which can plague emerging markets,” Smith adds.

Highlighting the problem of liquidity in emerging markets, especially when investing with an open-ended fund offering daily liquidity to investors, Smith says: “As an investment trust, [the fund] will overcome the issue of combining an open-ended fund with stocks which have limited  liquidity in the underlying  investments  since it  will raise an initial fixed amount of capital, to which I will subscribe.”

Thereafter, investor liquidity will be provided by trading in the trust's shares.

©2014 funds europe

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