Buffettology trust launch cancelled due to lack of investor demand

Negative investor sentiment towards the UK as an investment destination halted the planned IPO of Buffettology Smaller Companies Investment Trust.

The proposed launch of the Buffettology Smaller Companies Investment Trust has been cancelled due to insufficient investor demand.

The trust, which was to be overseen by Keith Ashworth-Lord, manager of the CFP SDL UK Buffettology fund, one of interactive investor’s Super 60 picks, had a fundraising target of £100 million.

Speaking to interactive investor’s Funds Fan podcast ahead of the proposed trust launch, Ashworth-Lord said that he had been finding attractive opportunities in the smaller companies part of the UK market, which the open-ended CFP SDL UK Buffettology fund could not easily back due to its fund size of £1.4 billion. This prompted the proposed launch of an investment trust that would focus purely on smaller companies – those with a market capitalisation of between £20 million and £500 million.

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But in a stock-exchange announcement today (26 October), Buffettology Smaller Companies Investment Trust said that it had decided not to proceed with the IPO at the current time.

A spokesman said: “The company has received a broad level of support from a significant number of investors and has been encouraged with the response to the investment proposition, however, overall demand has not been sufficient to meet the minimum gross proceeds (fundraising target of £100 million) set out in the prospectus published by the company on 30 September 2020.”

It is the second cancelled UK trust launch this month. The planned launch of the Tellworth British Recovery & Growth Trustwas also abandoned due to a lack of investor demand. 

The third of a trio of planned UK-focused trust launches is the Schroder British Opportunities Trust, which is seeking to raise £250 million.  

Negative investor sentiment towards the UK as an investment destination will have played a big part in both Buffettology Smaller Companies Investment Trust and Tellworth British Recovery & Growth Trust being unsuccessful in their fundraising efforts.

Another driver is that all UK growth trusts and UK smaller companies trusts are trading on discounts, a notable proportion with discounts in excess of 10%. This hands investors the chance to buy the cheap UK market at an even cheaper price, and in turn dissuades investors from backing a new trust.

In the Funds Fan podcast episode, Ashworth-Lord explains why be believes investors are wrongly deserting the UK market. He says: “The UK is a great place to do business – second only to the United States. We have got the entrepreneurial skills, the time zone, the international language of business, the legal systems and accounting standards. But you would never believe that if you read the press, it is all gloom, doom and despondency [around Brexit and Covid-19].”

Ashworth-Lord adds that “wall-to-wall negativity” has conspired to drive the London market down to levels against other developed markets that he has not seen for a long while.

He also reveals that 14 of the current 31 stocks in the CFP SDL UK Buffettology fund have been held for almost a decade, and discusses portfolio activity over the past six months following the notable stock-market correction in the first three months of the year. 

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