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Fundsmith Equity Class I - Income (GBP)

Sell:639.44p Buy:639.44p Change: 11.78p (1.81%)
Prices as at 20 December 2024
Sell:639.44p
Buy:639.44p
Change: 11.78p (1.81%)
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
Invest now
Prices as at 20 December 2024
Sell:639.44p
Buy:639.44p
Change: 11.78p (1.81%)
Prices as at 20 December 2024
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
Invest now
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

Our view on this Fund

This fund does not feature on the Wealth Shortlist of funds our analysts believe have the potential to outperform their peers over the long term. This is not a recommendation to sell; however, if you are thinking of adding to your investments, we believe the Wealth Shortlist is a good place to start. View funds on the Wealth Shortlist »

Smith has built an impressive long-term track record and we believe he uses a simple and straightforward investment approach. The fund doesn't currently feature on the Wealth Shortlist though. To conduct our analysis, we require regular access to the fund manager and up-to-date, monthly portfolio data, which some fund groups, including Fundsmith, choose not to disclose. We can't, however, make an exception to our process, so we won't be considering the fund for the list as things stand.

Given how long Smith has been in the industry, questions around his retirement are natural. Over the years he has made hires and surrounded himself with a tight knit team. Plans for his succession are in place but for the moment he remains integral to Fundsmith. Head of Research Julian Robins, a long-term colleague and friend, has been named the 'first line of defence' as and when Smith does eventually decide to step back.

Our view on the sector

It's natural for UK investors to focus on funds investing in their home market. But as the world has become more connected, so has the investment landscape. There are lots of funds investing across the globe, and these can be a great way to diversify an investment portfolio. Funds in the global sector can invest anywhere in the world. But they go about this in different ways. They vary in how much they can invest in certain types of companies, sectors, countries, or regions. Some focus on developed markets or large multinational corporations, while others invest more in higher-risk emerging markets or smaller companies. Some target companies with higher-growth expectations and others search for unloved companies with the potential to recover.

Performance Analysis

Since launch in November 2010, Smith has done an exceptional job in outperforming the global stock market. He has also outperformed peers within the IA Global Sector. Whilst his quality growth style has helped, our analysis suggests that Smith's stock selection has been the primary driver of returns. His focus on quality has helped the fund hold up relatively well when markets are falling. The fund has also outperformed during rising markets. Remember past performance isn't a guide to the future. Investments can fall as well as rise in value and you may not get back as much as you originally invest.

Investment Philosophy

Smith likes to do things differently from most other fund managers. That's the best way to achieve better performance in his view. He looks for companies that dominate their industry and are difficult to compete with. That might be because customers keep returning to the same product or service. He then invests in them for the long term, so the fund can benefit from the steady growth he expects from them. It also helps keep trading costs down.

Process and Portfolio Construction

Fundsmith Equity follows three simple rules.

Rule number one is to 'buy good companies'. Smith hunts for high-quality businesses which can dominate within their market niche. Companies with intangible assets are favoured, such as brand power, intellectual property, or a product or service that customers can't do without and would struggle to replace, even when times are tough. His focus on sustainable growth means he avoids companies whose prospects are closely tied to the fate of the economy like airlines and property developers.

Smith looks closely at a company's profits and pricing power - the ability to mark-up prices even during tough times without impacting consumer demand. Companies must also be in a strong financial position, so companies that require lots of debt to function such as banks and real estate are avoided.

Smith mainly invests in companies from developed markets with a large part of the fund invested in the US and the remainder in European countries and the UK. Consumer focused companies make up the largest part of the portfolio, and Smith also invests a significant amount in technology and healthcare.

The second rule is 'don't overpay'. Smith only invests in companies he believes he can buy at a fair share price. Whilst some of these companies may be considered 'expensive' on today's metrics, Smith believes their ability to grow faster and stronger is worth the premium price.

Smith is a long-term investor and once he invests in a company, he uses rule number three - 'do nothing'. He aims to hold onto companies for the long term, which help to benefit from compound growth. Trading less also helps keep dealing costs down and increases performance potential.

The process results in a portfolio of 20-30 companies. This means each holding can have a significant impact on performance, both positively and negatively, which can increase risk.

question mark Manager Track Record Based on HL Quantitative Research

  • Fundsmith Equity R Accumulation
  • IA Global
FROM: TO:


Source: Refinitiv Lipper

Fund Track Record

20/12/19 to 20/12/20 20/12/20 to 20/12/21 20/12/21 to 20/12/22 20/12/22 to 20/12/23 20/12/23 to 20/12/24
Annual return 18.43% 18.75% -14.11% 15.13% 8.79%

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Fund Management Group Comment

Fundsmith was established in 2010 by Terry Smith. The business is owned and controlled by its partners, who have worked closely together over many years, and is headquartered in London with an office in Connecticut, USA. Fundsmith focuses on delivering superior investment performance at a reasonable cost. The managers look for resilient businesses with excellent performance potential.

Information about the fund

Fund manager biography

manager photo
Manager Name: Terry Smith
Manager start date: 1 November 2010
Manager located in: London

Terry Smith graduated in History from University College Cardiff in 1974. He worked for Barclays Bank from 1974-83 and became an Associate of the Chartered Institute of Bankers in 1976. He obtained an MBA at The Management College, Henley in 1979. He became a stockbroker with W Greenwell & Co in 1984 and was the top-rated bank analyst in London from 1984-89. In 1990 he became head of UK Company Research at UBS Phillips & Drew, a position from which he was dismissed in 1992 following the publication of his best selling book Accounting for Growth. He joined Collins Stewart shortly after, and became a director in 1996. In 2000 he became Chief Executive and led the management buy-out of Collins Stewart, which was floated on the London Stock Exchange five months later. In 2003 Collins Stewart acquired Tullett Liberty and followed this in 2004 with the acquisition of Prebon Group, creating the world's second largest inter-dealer broker. Collins Stewart and Tullett Prebon were demerged in 2006 with Terry remaining CEO of Tullett Prebon until September 2014. In 2012 he was appointed a Member of the New Zealand Order of Merit for services to New Zealand-UK relations following the success of his campaign to commemorate the New Zealander, Air Marshal Sir Keith Park.

Data policy - All information should be used for indicative purposes only. You should independently check data before making any investment decision. HL cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used. Benchmark data provided subject to this disclaimer.
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
Invest now