Fundsmith Emerging Equities Trust: ii comments on proposed liquidation

interactive investor is surprised to see no talk of rollover option for the trust’s DIY investors.

• ii is surprised to see no talk of rollover option for the trust’s DIY investors, of which there are many

Dzmitry Lipski, Head of Funds Research, interactive investor, says: “Darwin has always been alive and well in the investment trust world – but investors should not necessarily see this as a bad thing. Rather than a seeing a failing strategy linger on, independent boards of directors of investment trusts are there, in part, to help ensure there is still a market and purpose in a particular strategy.

“What’s interesting here is that the liquidation of this trust [Fundsmith Emerging Equities Trust (LSE:FEET)] seems to have been brought to a head by Fundsmith LLP, the manager, who have served notice on the board. Pointedly, Terry Smith, CEO and CIO of Fundsmith LLP, comments that the trust ‘…has fallen below our expectations and, unlike other fund managers who might seek to hold onto the fund for the sake of the fee income, we feel it would be in the best interests of shareholders to receive their investment back in cash through a liquidation of the portfolio and wind-up of the Company.’

“The board have sought the views of large shareholders and are proposing a voluntary liquidation. While this is absolutely no bad thing, we are a little surprised to see, to date, no talk of a potential rollover option (with either investment trust or fund options). Structured in the right way, they can be tax-efficient and give investors the option to sell at a time of their choosing.

“Even so, we do agree that it can be far better to wind an investment trust up and return money to shareholders, than to limp on for years while taking fees from investors.”