Scottish Management Investment Trust PLC (LON:SMT) is positioning itself to be the long–saving vehicle of choice believes Jefferies, which has started coverage with a bullish overview and 415p target price.
“We see SMT as offering a highly differentiated proposition relative to other conventional investment trusts,” said the US broker.
In particular, the broker highlights recent actions on unquoted investments, management fees, the liquidity policy and gearing as conscious efforts to boost its appeal.
Shares in the trust have benefited from the change in emphasis and have risen by around 30% this year to 413p.
A change in style towards the long term structure of its fund manager Baillie Gifford has been a driver of this, believes Jefferies.
“This holistic approach is very different to most other equity focused trusts, in our view.
“All, understandably, seek to produce attractive returns for shareholders. However, very few reflect such an objective throughout their structure.”
Key has been the trust’s increasing use of unquoted investments.
“SMT seeks to access long-term growth in the increasing number of companies choosing to stay private and access late-stage fundraising.
“The intention and ability to hold unquoted companies through IPO and beyond offers a key distinction to fixed life private funds.”
The trust has also cut its management fee twice in the past two years - to 0.3% on assets of up to £4bn, 0.25% thereafter.
“Here SMT appears highly cognisant of the compounding impact of fees over the longer term, while we also note the very low fee in the context of the high portfolio active share, lack of a performance fee, and the access provided to unquoted investments.”
Liquidity policy
The broker also likes the trust’s liquidity policy, where to manage the discount/premium volatility it can issue shares from treasury or buy them back.
This differs from a pure discount management policy, given a willingness to repurchase shares on narrow discounts and as the management of the premium is equally important for long-term savers.
SMT's shares currently trade on a 3.9% premium to NAV.