The company decided to launch the trust because it believes there are not enough investment trusts looking at the best companies on a global basis. It has positioned the trust as the solution to the weaknesses it sees among other global investment trusts.
According to Bedlam, some trusts that invest globally are hampered by their size or mirror the sector and country weightings of various indices because they are driven by relative rather than absolute returns. The company has also observed a bias among some global investment trusts towards big companies which have less limited growth potential or a bias towards their domestic market and the US, which compromises global diversity.
Bedlam’s cherry picker investment trust will be jointly managed by Bedlam chief executive officer Jonathan Compton, and chief investment officer Ian McCallum.. It will be unconstrained by benchmark index, country and market cap weightings and stocks will be selected using Bedlam’s ‘Self Funding Take Over Test. This is a bottom up value screen that produces a list of companies that meet Bedlam’s standards for sustainable margins, strong free cash flow and good valuations. Further analysis is then undertaken on each company.
The focus on a small number of companies is preferred by Bedlam because it believes the economic and profit cycles by country or sector are never entirely synchronised. This creates opportunities to invest in specific companies at a turning point in their own particular business cycle.
Bedlam has also introduced two unusual features on this trust to set it apart from its peers. One feature is free loyalty shares to reward initial investors who still hold at least 50 per cent of their shares after 18 months, The other is that this trust will also be launched on the internet, as well as the usual direct selling and placing routes.
This trust enables investors to access Bedlam’s global investment process through a closed-ended structure, which has lower costs than an open-ended structure.
However, investment trusts are listed companies that have quoted share prices that can trade up or down relative to the total value of their underlying assets. While it may be good to buy into a trust that is trading at a discount, the potential danger for investors is that discounts may continue to widen.