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Smithson Investment Trust: June 2022 Update

Lead Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, cost, ESG integration and performance of the Smithson Investment Trust.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

  • Simon Barnard hunts for quality small and medium-sized companies around the globe
  • He uses the same investment process as other Fundsmith strategies - buy good companies, don’t overpay, and do nothing
  • The trust has performed well since launch, but has faced headwinds so far in 2022

How it fits in a portfolio

Smithson Investment Trust aims to grow capital over the long term by investing in small and medium-sized companies. These companies have potential to outperform larger, more established businesses but they carry more risk. The manager invests in high-quality companies, mostly from developed markets. The trust could work well alongside ‘value’ trusts investing in unloved companies or trusts focused on larger businesses. More broadly it could be used to diversify an adventurous long-term investment portfolio focused on growth. Investors in closed-ended funds should be aware the trust can trade at a discount or premium to Net Asset Value (NAV).


Simon Barnard joined Fundsmith in September 2017 and has managed the trust since launch in October 2018. After graduating from Cambridge University, Barnard joined Goldman Sachs Asset Management in 2003 as a research analyst before moving into portfolio management.

Will Morgan is assistant portfolio manager, a role he’s held since launch. He joined Fundsmith in July 2017 having previously worked at Goldman Sachs for 17 years. He started in equity sales before moving into research and has experience covering the insurance, construction & building materials, autos, and industrials sectors.

Terry Smith, the founder of Fundsmith and manager of the flagship Fundsmith Equity fund, is also on hand to provide advice and support where required.


Smithson Investment Trust uses a buy-and-hold approach, which is similar to the open-ended Fundsmith Equity fund. The main difference is the size of companies they invest in – Smithson invests in smaller businesses, those between £500m and £15bn in size. The average is currently £6.2bn. The manager has the flexibility to invest in unquoted companies, which are not listed on a stock market, and can borrow to invest, known as ‘gearing’. If used, this increases risk.

Barnard and his team hunt for high-quality businesses which can efficiently generate profits and dominate within their market niche. Companies with intangible assets are favoured, such as brand power, intellectual property, or a product or service that customers can’t do without and would struggle to replace. Long-term sustainable growth is key, which is why the team tends to avoid companies with lots of debt, which can be common in sectors such as banks and real estate. The manager also tends to avoid more economically sensitive sectors, such as financials, utilities, resources and transport.

The trust invests in 25-40 companies, and it currently holds 32. This is a high-conviction approach which means each holding can have a significant impact on performance, both positively and negatively, which increases risk.

The trust invests in developed markets with just under half in the US. Barnard also finds plenty of ideas in European countries such as the UK, Italy and Switzerland. In terms of sectors, just over 45% of the trust invests in technology companies, with a further 20% in industrials. The rest is mainly made up of consumer and healthcare companies.

Barnard is mindful of valuation and only buys companies he believes he can buy at a fair share price. Once invested, he simply ‘does nothing’. As a long-term investor his ideal holding period is forever which means changes are made infrequently. That said, he may sell a holding if the company’s share price no longer looks good value compared with its prospects, the management team makes poor decisions, or he finds a better idea elsewhere.

New investments this year include luxury fashion brand Moncler and technology business Addtech. Elsewhere, AO Smith, which provides water heating and treatment solutions, has been sold.


Fundsmith is a boutique fund group with offices in Mauritius, London, and the US. It was founded by Terry Smith in 2010 with the launch of Fundsmith Equity. It’s since expanded to include a small range of funds and investment trusts, most of which are run along the same lines. This dedication to the founding investment philosophy is attractive.

The business is employee-owned, with Smith owning the largest stake, and managers all investing significantly in the funds. This means both the business and the funds are run with the long term in mind, and managers’ interests are aligned with investors.

ESG integration

Managers at Fundsmith typically invest in companies with good ESG (Environmental, Social and Governance) credentials. They consider factors that may impact the potential for a business to produce sustainable returns. Many of the worst environmentally and socially performing businesses are automatically excluded from the trust because they have unsustainable business models. While this is not an exclusions-based fund, the team is unlikely to invest in oil and gas, energy, metals and mining, utilities, and aerospace and defence companies.

Corporate governance and engagement are a key part of the investment process, which includes analysing a company’s ownership structure and the way management is compensated. The team uses its proxy votes, supporting or opposing a company when necessary.


The ongoing annual charge over the trust’s financial year to 31 December 2021 was 1.0%. Investors should refer to the latest annual reports and accounts, and Key Information Document for details of the risks and charging structure. If held in a SIPP or ISA the HL platform charge of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. The platform charge doesn’t apply if the trust is held in a Fund and Share Account.


The trust has grown 28.43%* in share price terms since launch in 2018. Performance has been volatile at times though and, while the trust performed well until the end of 2021, it has since been through a tougher period. As always, past performance isn’t a guide to the future and investments can fall as well as rise in value so you may not get back as much as you originally invest.

The trust’s quality growth style of investing has previously helped performance, and in 2021 the managers’ focus on individual stock picking also benefited returns. Companies including cyber security business Fortinet and software firm Nemetschek were some of the strongest contributors last year.

Since the turn of the year though, this style has fallen out of favour and created a headwind for the trust. Rising inflation and interest rates are expected to erode the value of companies’ future cashflows, which can put a dampener on quality growth investing.

In addition, energy, utilities, and materials have been some of the strongest performing sectors in the broader global market. However, companies in these sectors don’t typically meet the team’s quality investment criteria, which means the trust has missed out on the gains made.

On the other hand, consumer, healthcare and technology companies, to which the trust is biased, have fallen in value. Weaker performers this year include Fevertree Drinks, medical technology company Masimo and software company Temenos.

Name % Growth % Growth % Growth % Growth % Growth
31/05/2017 To 31/05/2018 31/05/2018 To 31/05/2019 31/05/2019 To 31/05/2020 31/05/2020 To 31/05/2021 31/05/2021 To 31/05/2022
Smithson Investment Trust Plc Ord N/A N/A 24.74 16.80 -22.76

N/A - means performance for this period is not available.

Past performance is not a guide to the future. Source: *Lipper IM to 31/05/2022.

Find out more about Smithson Investment Trust including charges

View Smithson Investment Trust Key Information Document

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    Our investment trust research is for investors who understand the risks of investing and that investing in investment trusts isn't right for everyone. Investors should only invest if the trust's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of an investment trust before they invest, and make sure any new investment forms part of a diversified portfolio.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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