It was a good first half of the year for Smithson Investment Trust (SSON) after it significantly beat the market. The Fundsmith-managed vehicle grew net asset value by 11.7%, outperforming the MSCI World Small and Mid-Cap index by 9.8 percentage points.

That goes some way to making up for the miserable time investors experienced in 2022 where the quality-focused trust delivered net asset value total returns of -31.7% versus -13.7% for the benchmark index.

‘Economic factors such as inflation, interest rates and growth are hard to predict accurately. Our investment manager does not attempt to forecast future macroeconomic conditions and focuses instead on identifying good companies with robust business models that will be able to thrive throughout market cycles. The board believes that the patient investor will be well rewarded,’ said Smithson chairman Diana Dyer Bartlett.

Since its inception on 19 October 2018, Smithson’s net asset value per share total return has delivered a compound annual gain of 10.2% compared with 7% from its benchmark index. Despite that track record, the trust currently trades on a 11.7% discount to net asset value.

Over the past year Smithson has increased exposure to the industrials sector from 19% to 33% of the portfolio, making it the first time since launch that technology wasn’t the dominant sector.

This shift was partly a result of taking new positions in technical consultant Exponent (EXPO:NYSE) and fluid and metering specialist IDEX (IEX:NYSE). Selling its stake in simulation software group Ansys (ANSS:NASDAQ) reduced tech exposure, portfolio holding Sabre (SABR:NASDAQ) was reclassified by index provider MSCI from tech to consumer discretionary and payroll firm Paycom (PAYC:NYSE) moved to the industrial sector.

Smithson benefited from having a stake in software company Simcorp (SIM:CPH) as its shares jumped 38% in a single day earlier this year after receiving a takeover bid by Deutsche Börse.

US-based cybersecurity company Fortinet (NASDAQ: FTNT) performed well as a portfolio constituent, up over 45% during the half-year period. ‘Corporate cybersecurity budgets remained healthy, allowing the company to grow revenue by 32%,’ said fund manager Simon Barnard.

He also highlighted software company Nemetschek (ETR: NEM) whose valuation fell during the interest rate increases last year but whose share price has performed better this year.

Barnard was also apologetic for the performance of the investment trust last year: ‘While periods of underperformance are undesirable and always very uncomfortable, they do tend to have the silver lining of producing subsequent periods of improved prospects.’

DISCLAIMER: Daniel Coatsworth who edited this article owns shares in Smithson

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