Terry Smith to launch emerging markets investment trust Its focus will be on consumer stocks since, first, this is the largest area of focus of our strategy, and, second, there is an established trend for the emergence of consumer classes in emerging markets which looks likely to last several decades and which should provide a tailwind for its performance. The new fund's holdings will be chosen from about 150 companies that Fundsmith has already identified. "Many are already known to us as they are quoted subsidiaries, associates or franchisees of companies which we already research for the Fundsmith Equity fund," the company said. This also helps with the corporate governance issues, which can plague emerging markets. Mr Smith favours well established companies whose sales are not at the mercy of economic cycles - those whose products are bought every day by large numbers of consumers for relatively small sums. He also likes firms whose customers would find it difficult to switch to a rival, such as software companies and lift maintenance firms. Mr Smith has chosen to structure the new fund as an investment trust because this avoids the need to buy and sell holdings every day, something that it not always easy in emerging markets. His current fund, an "open-ended investment company," similar to a unit trust, matches the number of shares in each of its holdings with the exact demand from investors, so daily buying and selling is needed as new customers invest money and existing ones depart. With an investment trust, by contrast, the fund makes its investments with the money raised from initial investors. When they want to take money out, they sell their shares in the trust to an incoming investor via the stock market - the trust itself is not involved and does not have to adjust its holdings. Fundsmith Equity has produced returns of 55pc over the past three years, according to FE Trustnet, compared with 23pc for the average global equity fund. Fund and share tips are included in our weekly newsletter. Just enter your email