Fizzy drinks could put the sparkle in new emerging markets fund
NEIL N Woodford’s Equity Income Fund, which will be launched tomorrow, is not t the only new fund in town. Te Terry Smith, chief executive of investment inv house Fundsmith, d ih hopes h to raise £250million from the current launch of an investment trust focusing on emerging markets.
Like Woodford, who enjoyed incredible success at Invesco Perpetual, managing its Income and High Income funds before going it alone with Woodford Investment Management, Smith has an enviable record – albeit over a shorter period.
His Fundsmith Equity Fund is among the top performing in its global equity sector, delivering a return of 67 per cent since its launch three and a half years ago.
Smith knows his mind. For a start, he prefers to hold cash generative businesses that are consumer focused – from food and drink manufacturers to hotel groups. Among the equity fund’s top holdings are American drinks giant Doctor Pepper Snapple – the producer of Canada Dry, 7 Up and Sunkist – and Domino’s Pizza. He has no truck with banks, chemical firms or airlines – all too risky.
He also likes to run concentrated portfolios and stick with holdings through thick and thin. The result is that the fund has only 25 stocks.
He says: ‘With a portfolio of 25 stocks, I have all the diversity I need as a fund manager. It means the fund is concentrated on the world’s greatest companies.’
Other holdings include Imperial Tobacco, Microsoft and Unilever.
Unsurprisingly these investment principles will underpin the new trust. So the 35 to 55 stocks will be consumer focused with an ability to generate cash. The difference is that the companies he buys will have a big slice of their operations in developing economies. Smith says independent research shows that consumption in emerging markets will rise from $12trillion (£7trillion) in 2010 to $30trillion in 2025, an increase of 150 per cent.
For developed markets, the increase will be just 30 per cent.
The trust’s launch could be well timed. Hugh Young, managing director of Aberdeen Asset Management’s Asian operations, believes that emerging markets ‘appear to be turning a corner’ after years of underperformance.
Further details on the new trust can be obtained at feetplc.co.uk. The minimum investment during the offer period, which closes at noon on June 20, is £1,000. Details on the Woodford Equity Income Fund can be found at hl.co.uk.