The Lemon Fool

Hello All

I have an old endowment maturing this month which I left running even though the place was sold about 17 years ago. (Yes it would have performed only marginally worse under the mattress if you are wondering )

Anyway, I was considering of using some of the money for this years ISA allowance, and investing it for global exposure through Fundsmith's Emerging Equities Trust (FEET).
For background info, currently all my SIPP & ISA is in equities. I don't do Funds at all (and probably won't), and only IT's in JISA's and a JSIPP. So my knowledge of them is fairly limited.

FEET is quite a young IT, but I like Terry Smith's mindset, and that the IT is broadly in Consumer Defensive equities in the developing world, which I think is a fairly safe and moderately profitable investment looking ahead 10 years.
The only downside (and a major one for me) is the charges.

Does anyone hold FEET?, and would you care to share your experience?

Thanks
BC

baldchap wrote:The only downside (and a major one for me) is the charges.

I think you have to ask yourself whether the performance after charges is what you are looking for.

This is what they say will be charged

Our Annual Management Charge for FEET is 1.25% of the value of funds which we manage for you per annum. We estimate the OCF in FEET’s first year of operation will be 1.60 – 1.75%. We do not charge performance fees unlike many of the competing London listed investment trusts. Our interests are aligned, in a better way, as substantial co-investors in the fun

I think you have to ask yourself whether the performance after charges is what you are looking for.

That is it in a nutshell. I have read up about it as much as I can.
Personally anything north of 1% is too rich. I was hoping somebody could convince me otherwise.

Normally I would simply emulate the major parts of the best IT/Funds, and am happy to do so.
The difference with this IT is that it is obviously in emerging market. A plus point is that unlike other IT's in this sector, is that it avoids Financials, which I am more than happy about.

I may just put in half this years allowance when the premium dips sufficiently and see how it goes.

baldchap wrote:Personally anything north of 1% is too rich. I was hoping somebody could convince me otherwise.

What percentage is reasonable may depend on how much work management are doing for you.

No idea about FEET: never looked at it (seeing my own past the paunch is enough). But it seems entirely plausible that an investor in emerging markets might reasonably devote more resources to research and due diligence than an investor in the FTSE.

On the other hand, it is above the sector average.

Looking at it, it is indeed rather different to EM funds I already hold, with such a strong focus on their consumer markets. I don't like buying at a non-trivial premium, but I could almost be tempted.

Looking at it, it is indeed rather different to EM funds I already hold, with such a strong focus on their consumer markets. I don't like buying at a non-trivial premium, but I could almost be tempted.

Sorry if I have drawn you in

I must admit to being a bit biased - Terry has done so much for my wealth since swapping an old ISA with M & S into his equity fund right at the start.

I went into FEET right at the start and I'm very happy. For me it's a buy and forget, I wanted exposure to emerging countries, but not necessarily the BRIC ones. I like Terry's philosophy of buying brands in EM's and I'm not going to dabble in individual equities in India etc. On that basis I'm happy to pay him to do it for me.

As a side issue, I absolutely believe that an IT structure is the correct way to invest in these sort of markets.

As ever though, ask me again in five years!

Thanks Doug

Nice to hear from a satisfied customer.
As you say, this IT is investing in Asian markets that I am unlikely to trade in directly, but certainly the type of company I like, so why not. Having done quite a bit of reading over the weekend, I will probably invest next week.
Utilico EM has also piqued my interest as another IT investing in my types of company.

baldchap wrote:Sorry if I have drawn you in

Hehe. Baldchap and hairychap? Twenty years ago I was one half of Blackbeard and Redbeard[1] in a music club.

I note it's got a heavy India focus. I'm already overweight India, by virtue of my holding in the Stewart Investors India fund having triple-bagged, plus some other more general EM holdings. So I may give it a miss. On the other hand, I've been contemplating rebalancing by selling half that stake (ditto the fund's China cousin): maybe this would be a new home for some of the funds released? That would leave me a little less overweight. Something to think about if it goes to a decent discount.

[1] being a translation of Barbanera and Barbarossa.

doug2500 wrote:As a side issue, I absolutely believe that an IT structure is the correct way to invest in these sort of markets.

I had a read through of the Report and Accounts. One thing that struck me is that they have been expanding the shares in issue. That might explain why the price stands at a small premium to NAV. They also claim to have a mechanism in place for buy backs if the prices moves to a discount.

Alaric wrote:One thing that struck me is that they have been expanding the shares in issue. That might explain why the price stands at a small premium to NAV.

You mean as opposed to a larger premium to NAV if they hadn't been expanding the shares in issue?

mc2fool wrote:You mean as opposed to a larger premium to NAV if they hadn't been expanding the shares in issue?

I expect so. It appears their management objective is to attempt to have the fund priced almost as if it's an OEIC or ETF so there would be next to no discount or premium between NAV and market value.

It's not paying any dividends. That may be a characteristic of the Companies in which they invest, but also that charges have swallowed any potential dividends. The Report and Accounts also mentioned that they might change in future modify the charging policy to make charges to Capital rather than Revenue