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 from Fundsmith Equity Fund shows that while the fund slightly underperformed the market in the first half of 2015, it has more than doubled since its 2010 launch (16.3% annualized vs 10.5% for the market). The manager trades very rarely, keeps costs low (total cost 1.14%), and only buys high-quality companies with durable competitive advantages (a 'moat') that generate strong cash flow with little debt. For ordinary investors, it's a reminder to focus on long-term performance and low fees, not short-term swings.
Fundsmith Equity Fund returned 0.9% in the first half of 2015, underperforming the MSCI World's 1.8%. During the period, the fund opened a new position in Waters Corporation (a manufacturer of mass spectrometry/chromatography equipment), exited Choice Hotels (due to non-core business risks), and inc
| Metric | Fundsmith Equity Fund (T Class Acc) | MSCI World |
|---|---|---|
| 1H 2015 Return | 0.9% | 1.8% |
| Cumulative Return Since Inception (01.11.2010-30.06.2015) | 101.8% | 59.4% |
| Annualised Return Since Inception | 16.3% | 10.5% |
Note: The report uses the T Class Accumulation share class as the representative class; all performance data is from this class.
| Item | Data |
|---|---|
| Total Fund Size (all share classes combined) | Approx. £3,475,304,733 (as at 30.06.2015) |
| OCF - T Class | 1.08% |
| OCF - R Class | 1.58% |
| OCF - I Class Net | 0.98% |
| Turnover (half-year) | -1.2% (negative value distorted by large capital inflows) |
| Discretionary Transaction Costs (half-year) | £152,951 (0.004% of the fund) |
| Total Cost Ratio (TCI) | 1.14% (includes OCF + transaction costs) |
1. Underperformed benchmark in the half-year: The fund returned 0.9% in the first half, below the MSCI World's 1.8%, primarily because the market was generally flat, weighed down by deflation fears, Greek debt, and China's slowdown.
2. Main contributors: Domino's Pizza contributed 0.76%, Imperial Tobacco 0.64%, Sage 0.47%, Unilever 0.36%, Reckitt Benckiser 0.33%.
3. Main detractors: Procter & Gamble -0.39%, Kone -0.35%, Microsoft -0.32%, Johnson & Johnson -0.26%, 3M -0.23%; the manager believes these price fluctuations do not constitute a reason to sell.
4. Low turnover and cost advantage: Turnover of -1.2%, discretionary transaction costs of only 0.004% of the fund; OCF of 1.08% (down from 1.09% in the prior year), total cost ratio (TCI) of 1.14%, well below the peer average.
5. Adherence to investment philosophy: Maintains holdings in companies with high returns, moats, low leverage, and predictable reinvestment, emphasising long-term holding and avoiding short-term trading.