An investment trust inspired by the principles of Berkshire Hathaway CEO Warren Buffet has abandoned plans to float on the London Stock Exchange.
The Buffetology Smaller Companies Investment Trust was launched in the hope of raising at least £100m ($130m) through an initial public offering (IPO) this month.
It published its intention to float and prospectus documents last month, but its board announced on Monday they had scrapped the planned flotation.
“The company has received a broad level of support from a significant number of investors and has been encouraged with the response to the investment proposition, however, overall demand has not been sufficient to meet the Minimum Gross Proceeds set out in the prospectus,” it said in a statement. It will return all funds already committed by investors.
The launch of the trust has not been abandoned altogether, however, with the company saying only that it had “decided not to proceed with the initial issue at the current time.”
The trust is the brainchild of Manchester-based asset management company Sanford DeLand, which already runs a well-regarded Buffetology fund inspired by the leading US investor’s philosophy. Neither is endorsed or sponsored by Buffet himself.
It had set out plans to become a long-term investor in between 30 and 50 British companies across sectors with a market capitalisation between £20m and £500m.
“Over the past 65 years, no major asset class in the UK has performed better than smaller companies,” said in its intention to float documents. “Smaller companies offer a particularly attractive investment universe for active managers as they tend to be less well researched by traditional broking houses and less well understood by the investment community.”
“By choosing the structure of a closed-ended investment trust rather than an open-ended fund, many of the liquidity concerns over investment in smaller quoted companies can be addressed.”
But Laith Khalaf, a financial analyst at AJ Bell, noted: “The Buffett name and the excellent performance record of Sanford DeLand simply hasn’t put enough bums on seats to get its UK smaller companies launch off the ground. Sentiment towards the UK market is at a low ebb and a resurgence of virus cases has further undermined confidence.
“Smaller companies tend to beat their big blue chip rivals over the long term, but it’s understandable investors see them as being at the sharp end of any impending economic trauma. The Buffettology focus on quality companies should have provided some downside protection on that front, but that’s academic now.”
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