Join our community of smart investors

Buffettology drops investment trust IPO

A fresh blow for UK equity contrarians
Buffettology drops investment trust IPO
  • A report on the decision to drop plans for a new UK equity investment trust
  • Details of other recent launch plans and the challenges they face

The team behind the hugely popular CFP SDL UK Buffettology fund (GB00BF0LDZ31) has dropped plans to launch a UK smaller companies investment trust, citing insufficient overall demand.

Sanford Deland Asset Management noted that while initial public offering (IPO) plans for the Buffettology Smaller Companies Investment Trust had received “a broad level of support from a significant number of investors”, overall demand had not been sufficient. The trust had been seeking at least £100m in its first stage of fundraising.

The news marks a fresh blow for fund managers looking to capitalise on the deep unpopularity – and low valuations – of the UK equity market. Plans for another new UK trust, Tellworth British Recovery & Growth, were dropped earlier this month amid insufficient demand. The Tellworth team had argued that a volatile environment, combined with the lack of interest in UK stocks, had created stockpicking opportunities. They had sought to raise a minimum of £75m.

Some had suggested the Buffettology trust might fare better, given the huge popularity and strong performance of the same team's £1.3bn flagship open-ended fund. However, investors looking to take a bet on domestic stocks can already turn to several UK equity investment trusts whose shares trade at large discounts to the value of underlying assets, from generalist names to income funds and those focused on small caps.

One possible launch now remains, with the Schroder British Opportunities Trust having announced plans to IPO. The original announcement said the trust would seek to raise £250m to “invest in the future growth of British business, both public and private, while supporting UK employment through the pandemic and beyond”. The team behind the trust would also encourage businesses to adopt best environmental, social and governance (ESG) practices. While Schroders has significant resources with which to promote any IPO, those looking to enter the market now do seem to face an uphill battle.