Smithson asset allocation

aroominyork

I am currently rebalancing my portfolio and had a look at the asset allocation for Smithson, which has risen nicely since I bought it in April 2019. Looking at Morningstar, it has a P/E over 40, and 70% is in sensitive stocks of which over 40% is technology. Does anyone recall whether it used to be so growth/tech oriented, or has it upped the ante in line with recent trends? (By way of comparison, Fundsmith has P/E of 31, 30% in sensitive of which 16% is tech.)

Prism

I have held it since IPO and it has barely changing in allocation since then. The only holdings I can remember being added were Rational, the oven company, and Fevertree. So if anything it looks like the tech has been left to run and the additions made from the almost daily extra shares they sell have been in non tech. In fact, having a quick scan it doesn't look like the tech companies have done all of the heavy lifting. For example Paycom is up around 300%, Verisign only 60% and Sabre is down -50%. It looks like healthcare is been the strongest sector for them.

Highest individual PEs are Abcam and Ambu at around 275 - both healthcare.

aroominyork

I thought you might get in first, Prism! Well, I guess I should think seriously of biting the bullet and selling. No point looking under the bonnet, not finding what you expect but doing nothing about it. I have a fair bit of tech elsewhere and I also try to limit my growth exposure so that I don't get too much of a jolt as and when value comes back into fashion for more than a couple of months. Right now my equities include 12% Fundsmith Sustainable and 8% Smithson, so I'll probably put half the Smithson into FS and the other half into a global tracker.

Prism

How about a world small cap tracker like WLDS or Vanguards Global small cap index fund. Both are around 50/50 mid/small cap and more balanced between value and growth.

aroominyork

I would only buy an active fund for small caps. I might root around for an alternative but even without SSON I will have c.25% in small/mid caps so I wouldn't be out of balance putting that spare 8% into larger companies.

AnotherJoe

Prism said:

How about a world small cap tracker like WLDS or Vanguards Global small cap index fund. Both are around 50/50 mid/small cap and more balanced between value and growth.

What aroominyorksaid, for small companies, use an active fund. There are plenty, both global and geographic focussed.

Prism

AnotherJoe said:

Prism said:

How about a world small cap tracker like WLDS or Vanguards Global small cap index fund. Both are around 50/50 mid/small cap and more balanced between value and growth.

What aroominyorksaid, for small companies, use an active fund. There are plenty, both global and geographic focussed.

I do although most are growth focused, just providing another option.

aroominyork

Yes, most are growth focused though looking at Morningstar's style box for Liontrust UK Smaller Companies it shows the UK small cap sector (yellow) centred in growth but FTSE small cap ex-IT (red) centred firmly in value. Curious - can anyone explain that? In fact, I don't understand the difference between what the yellow and red represent - an explanation on that would be appreciated.

Linton

The Liontrust fund is holding a larger % of  higher risk growth shares than the Index.  For example 23% tech for the fund and 10.5% for the index and conversely 5% consumer cyclical (eg hotels, fashion, airlines) for the fund and 21% for the index.

"UK Small Cap Equity" refers to all funds in the sector so they almost all prefer growth to value with the Liontrust fund a bit more than the average..

aroominyork

I don't think you can talk about "higher risk growth shares". You can say "higher risk" and you can say "growth shares" but the two are not synonymous. Liontrust has an FE of 75; only one fund out of 51 on Trustnet has a lower FE (Downing micro-cap, which has lost money over the last five years while Liontrust has risen 126%).

I would still like to understand the difference between 'UK small cap equity' and 'FTSE small cap ex-IT' on the style map.

Linton

aroominyork said:

I don't think you can talk about "higher risk growth shares". You can say "higher risk" and you can say "growth shares" but the two are not synonymous. Liontrust has an FE of 75; only one fund out of 51 on Trustnet has a lower FE (Downing micro-cap, which has lost money over the last five years while Liontrust has risen 126%).

I would still like to understand the difference between 'UK small cap equity' and 'FTSE small cap ex-IT' on the style map.

The FE score is a measure of 3 year volatility.  That may or may not correspond to what people could perceive as risk, such as how far did the fund crash in 2008.

"UK Small Cap Equity" refers to the average fund in the sector, it is an index of funds.  FTSE SmallCap ex-IT refers to the  average share in the FTSE SmallCap Ex-IT index of shares.  They are different because people who buy funds are more likely to base  their decision on performance figures rather than the likelihood of a major fall in a crash.