Our performance has been like watching paint dry, admits Terry Smith’s fund
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An investment trust run by the star fund manager Terry Smith has admitted performance has been like “watching paint dry” after struggling to keep pace with the rally in US tech stocks.
Smithson Investment Trust, a £2bn fund run by Mr Smith’s eponymous manager Fundsmith, said the rise of “glamour” US tech stocks such as Nvidia was “sucking the air out” of the smaller end of the stock market.
Smithson was founded six years ago to invest in companies that were too small for inclusion in Mr Smith’s flagship Fundsmith Equity Fund.
However, the trust’s performance has been strained recently, with results published on Monday showing net asset value declined by 1.8pc over the past six months.
Simon Barnard, who runs Smithson, admitted the sluggish performance had been “frustrating” for the trust’s army of retail investors.
“As a colleague recently commented, our performance so far this year has been like watching paint dry, and I couldn’t agree more; we are finding it as frustrating as you are,” he told investors.
“There is no doubt that this is a tough time in the market for smaller companies. As has happened in the past, large and glamourous stocks have outperformed strongly this year, while small and medium-sized companies as an asset class have struggled, and we only need to look at certain individual companies to get a sense of the scale of this issue.”
He pointed to stocks including the computer chip maker Nvidia, which has increased by $1.8 trillion (£1.4 trillion) in value over the past six months amid booming interest in artificial intelligence.
Smaller stocks favoured by Smithson have failed to rise in value as investors plough their money into the likes of Nvidia instead.
Smithson was the largest UK investment trust in history when it launched in 2018, having raised £800m from investors lured by Mr Smith’s brand of fund management.
The trust bought into five new companies during the period – HMS Networks, Inficon, Melexis Choice Hotels and Reply — and sold three companies.
Sales included exiting the trust’s entire holding in Swiss banking software group Temenos.
Fundsmith was set up by Mr Smith in 2010 and now has £36bn of assets under management.