Fundsmith is the fund firm Terry Smith ("Britain's Warren Buffett") founded in 2010, with a discipline of radical simplicity — Buy Good Companies, Don't Overpay, Do Nothing: a concentrated book of 20-30 high-ROCE global consumer, healthcare and tech franchises with near-zero turnover. His annual shareholder letters are famous for wit and common sense; peak AUM topped £25bn.
This report covers Fundsmith Equity Fund's 2015 performance: a 15.7% return, far above the market's 4.9%. Manager Terry Smith only buys high-quality companies with strong returns on capital (26% ROCE), low debt, and good cash flow. He trades very little (2% turnover), keeping costs low. He sold Domino's Pizza because it was overpriced and Choice Hotels because management strayed into unrelated businesses. For regular investors, it shows that sticking with great businesses and keeping costs down beats frequent trading. Worth reading because the fund outperforms consistently and the manager explains every move clearly.
The fund returned +15.7% in 2015, outperforming the benchmark (MSCI World Index) by +4.9%. This period, new positions were established in Waters Corporation and IDEXX Laboratories, and the overvalued Domino's Pizza was fully liquidated. The manager emphasized that the portfolio's ROCE reached 26.0%,
| Share Class | Period | Fund Return | Benchmark Return | Benchmark Description |
|---|---|---|---|---|
| T Class Acc | 2015 | +15.7% | +4.9% | MSCI World Index (GBP, dividends reinvested) |
| T Class Acc | Since Inception (01.11.2010 – 31.12.2015) | Cumulative +131.4%, Annualised +17.6% | Cumulative +64.3%, Annualised +10.1% | MSCI World Index (GBP, dividends reinvested) |
Note: FTSE 100 Index total return in 2015 was -1.0%, S&P 500 Index total return was +1.4%.
The report does not disclose a detailed list of the top ten holdings. The manager commentary only lists the top five contributors and bottom five contributors for the year (ranked by percentage contribution to performance).
Top Five Contributors (contribution to fund performance):
| Company | Contribution |
|---|---|
| Dr Pepper Snapple | +1.94% |
| Imperial Tobacco | +1.79% |
| Microsoft | +1.69% |
| Sage | +1.36% |
| Reckitt Benckiser | +1.05% |
Bottom Five Contributors (lowest value indicates negative contribution):
| Company | Contribution |
|---|---|
| Procter & Gamble | -0.22% |
| PayPal | -0.15% |
| 3M | -0.02% |
| Kone | +0.02% |
| Colgate Palmolive | +0.05% |
New Positions (from manager commentary):
Closed Positions:
Notable Buys (from the largest purchases list):
| Company | Cost (£) |
|---|---|
| IDEXX Laboratories | 109,129,038 |
| Waters | 93,270,105 |
| Sage | 90,496,657 |
| Intertek | 83,835,387 |
| Johnson & Johnson | 75,164,952 |
Notable Sells (from the largest sales list):
| Company | Proceeds (£) |
|---|---|
| Domino's Pizza | 154,775,231 |
| Ebay | 73,808,490 |
| Choice Hotels International | 37,344,360 |
| Becton Dickinson | 21,156,869 |
| Proctor & Gamble | 2,997,193 |
| Item | Value (T Class Acc) | Notes |
|---|---|---|
| Ongoing Charges Figure (OCF) | 1.07% | 2015 |
| Total Cost of Investment (TCI) | 1.13% | Includes transaction costs (OCF + commissions, spreads, stamp duty, etc.) |
| Direct Transaction Costs | 0.06% | As a percentage of fund net assets |
| Portfolio Turnover Rate | 2% | Voluntary trading is extremely low; voluntary trading costs only £496,507 (0.014% of AUM) |
| Total Fund Size (AUM) | £4,565,065,176 | As of 31.12.2015, all share classes combined |
| Dividend (T Income) | 2.22p per share | 2015 distribution |
Note: I Class Acc OCF is 0.97%, R Class Acc OCF is 1.57%.