Terry Smith’s Fundsmith equity fund returns 86.3 per cent over 4 years

Fundsmith value investing approach delivers 15.6 per cent over past year

Terry Smith’s Fundsmith equity fund returns 86.3 per cent over 4 years

Terry SmithTerry Smith’s Fundsmith equity fund has generated a return of 15.6% in the 12 months ending October 31. This beats both the MSCI World Index returnof 9.1% and the average IMA Globalfund return of 2.7% over the same period.

Over the four years since launch in 2010 the fund’s total return is 86.3%, representing a compound annual total return of 16.8%, outperforming the MSCI World Index by 34.2% and the average IMA Global fund by 53.1%.

In September 2014, Terry Smith stood down as Chief Executive of Tullett Prebon to focus full-time on managing Fundsmith.

Terry Smith, founder and chief executive of Fundsmith, said: “We continue to employ exactly the same stringent investment process that we did on day one. Firstly, we identify good companies, secondly, we buy their shares at a fair or better price, and lastly we seek to do the most difficult thing of all, nothing. In this way we allow the great returns that our portfolio companies generate to mount up and compound their share prices.

“The rise in the fund’s price over the past year has not been achieved through market timing (something we rigorously eschew) or trading in positions. We only added two new positions and sold one.

“It is virtually impossible for us (and probably anyone else) to say which way markets are headed in the next 12 months, but we can be certain that the wonderful positions that our portfolio companies occupy will allow them to continue to grow their intrinsic value.

“I continue to be amazed by the baloney that is spoken by so many so-called investment professionals and at the fund management industry’s tendency to add unnecessary complexity to financial products that merely seems to serve to justify high fees. Conversely, it is pleasing that the simplicity of our fund has appealed to over 11,000 investors, ranging from some of the world’s largest, most sophisticated investors to regular monthly savers.  We are also pleased that, as a result of our scale, we estimate that the ongoing charges will be less than 10 basis points (0.1%) over our flat fees for the 12 months ending 31st December 2014.” 

Top 10 holdings

Smith was reluctant to give precise details on the percentage of the fund held in each of his top 10 holdings, although did disclose that his top 10 holdings are:

• Microsoft

• Dr Pepper Snapple

• Stryker

• Reckitt Benckiser

• Unilever

• Becton Dickinson

• Domino’s Pizza

• Kone

• Imperial Tobacco

• Pepsico




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About Author

Christopher Menon

Every Investor Editor Chris Menon is a financial journalist who has written regularly for national newspapers, magazines and websites about personal finance, with particular emphasis on investing.