Smithson Investment Trust Faces Major Restructuring after Shareholder Exodus

Smithson Investment Trust, once heralded as a premier investment vehicle, is undergoing significant changes following the announcement that 59 per cent of its shareholders have opted for a cash exit. This restructuring comes as the investment trust shifts to an open-ended status, a move prompted by its ongoing performance challenges.

Amid considerable investor discontent, the trust will see approximately £970 million withdrawn, leading to a reduction in assets under management and projected annual fee losses of around £8.7 million. The decision to convert to an open-ended fund found support from Terry Smith, its well-known manager, who acknowledged the necessity for change after the trust failed to adequately respond to shareholder pressures.

Smith, aged 72, has been recognized for his prowess in stock selection, having established Smithson to provide retail investors with access to mid-sized companies globally. However, the fund has faced criticism for lagging behind its benchmarks consistently, ultimately leading to declining investor confidence.

The move to open-ended status follows years of share buybacks that failed to close the persistent discount to net asset value. Smith emphasized that maintaining the previous strategy could no longer be justified, urging a transformation in the trust’s approach to better serve its shareholders.

Shareholders are set to vote on the proposed restructuring on February 27, with the new fund units anticipated to begin trading on March 2. Investors contemplating their options will have the choice of cash withdrawals, reflecting a broader trend of shareholder activism influencing investment strategies.

This transition marks a bittersweet chapter for Smithson and its investors as the pressure from activist investors continues to reshape the landscape for asset management in the UK. The fate of the trust now rests in the hands of its shareholders as they navigate these significant changes.