Edison Research - Fundsmith Emerging Equities Trust (FEET): Initiation - Sticking to its guns

Fundsmith Emerging Equities Trust (FEET), an emerging markets (EM) consumer theme focused investment trust launched in 2014, has recently undergone a gradual, but notable transition.

In May 2019 Michael O'Brien and Sandip Patodia took over day-to-day management from Terry Smith, to focus full-time on FEET. The trust, which has evolved with the emerging consumer story since launch, has retained the same strategy: to own high-quality, consumer-focused companies. A number of changes of emphasis have been made. The managers have made the portfolio more focused by number of holdings (38 at end-December 2020) yet have diversified it by theme and sector. The managers stress that the fund suits patient investors with a long-term time horizon, as the underlying strong portfolio fundamentals should eventually come through in superior performance, regardless of market momentum.

The trust currently trades very close to premium to its cum-income NAV on a 3.9% discount, above its three-year average of 5.3% and one-year average of 11.6%. The team's consistent implementation of its strategy regardless of shorter-term market fluctuations and a gradual portfolio transition have resulted in the discount narrowing. The board monitors the share price discount and has been primarily addressing it via investor education activities rather than active share buybacks.

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