25th Jul 2019 12:49
(Alliance News) - Fundsmith Emerging Equities Trust PLC said it underperformed against its benchmark in the first half of the year as the index was largely boosted by investment in larger stocks.
Fundsmith's net asset value per share total return for the six months to June 30 was 2.9% while its benchmark - the MSCI Emerging & Frontier Markets Index on a net sterling adjusted basis - rose 11%.
The trust explained that it does typically underperform its benchmark when "the index has performed strongly" as "the inflow of investors money has been in the form of exchange traded funds which typically invest in proportion to the weighting a stock has in the index, and thus concentrate buying on the largest stocks, having a disproportionate impact on their share prices".
The company's net asset value per share on June 30 was 1,255.1 pence, up from 1,236.7p the year before and 1,222.0p on December 31. The share price was 1,195.0p versus 1,245.0p year-on-year, meaning the company's share price was at a 4.8% discount to NAV, having been at a 0.7% premium.
The company said it has been monitoring the discount. While Fundsmith does hold the view that "share buybacks are not always in the best interest of customers" it does have the authroity to buy back up to 15% of shares if a "sustained and material discount" were to emerge.
Chair Martin Bralsford said: "It is likely that developments within our eligible emerging markets are likely to result in continued volatility. However, the board shares our investment manager's strong belief that the economies of the eligible countries in which your company invests have growth prospects that far exceed more developed markets. Accordingly, our investment manager's fundamental approach and portfolio construction processes remain unchanged, focusing on long-established, well-managed companies with cash generative brands of consumer staple products. The board continues to support this investment strategy and believes that it should deliver attractive returns for our shareholders in the long term."
Shares in Fundsmith were up 1.1% at 1,197.80p on Thursday.
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