Smithson (SSON)

Smithson Investment Trust (SSON) offers investors high-conviction exposure to a range of high-quality global equities at the small to mid-cap end of the market cap spectrum. The trust is managed by Simon Barnard and assistant portfolio manager Will Morgan, who have inherited an investment approach founded on identifying companies with superior operating characteristics, which they look to invest in at attractive valuations and hold over the very long term—a process established by Fundsmith’s longstanding CEO and industry veteran Terry Smith. Allocations to consumer sectors, information technology—typically software companies—and industrials, are core allocations which are a function of Simon and Will’s quality focused bottom-up investment process (see Portfolio).

SSON can experience heightened levels of volatility, and the managers do not take on gearing to avoid exacerbating this. Volatility has been particularly evident over the past few years, which at times has created significant swings in performance. Over the long term, risk-adjusted performance has been strong, as the trust has generated a NAV total return of 60.7% versus the MSCI World SMID Index and the global smaller companies sector returns of 54.5% and 34.2% over the past five years. Performance over 2023 has also held up well as inflation and interest rate expectations seem to have plateaued, and the lagging impact of supply chain and pandemic disruptions has faded. SSON’s high-quality holdings have responded well, contributing to the trust’s NAV total return of 13.3% compared to the 9.1% and 4.5% return from the MSCI SMID Index and the peer group (see Performance).

As we discuss in Discount, challenging macroeconomic conditions and poor investor sentiment have impacted SSON’s share price and the discount has continued to widen to 12.1%, compared to its long-term average discount of 2%.