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.
Fundsmith Equity Fund's 2018 annual letter reports a 2.2% gain, while global stocks fell 3%. Manager Terry Smith sticks to high-quality businesses with strong cash flows and low debt, like Facebook (which he bought more of despite its troubles). He trades very rarely, keeping costs low. The key takeaway: buy good companies, hold them, and don't overpay. Simple but powerful.
In 2018, the fund returned +2.2%, outperforming the MSCI World Index (-3.0%) and the FTSE 100 (-8.7%). During the period, the fund significantly increased its position in Facebook (the manager believes its "glitch" provides a buying opportunity), and fully exited Dr Pepper Snapple and Nestlé (questi
| Metric | Fund (T Class Acc) | MSCI World Index (£ net) | FTSE 100 Index |
|---|---|---|---|
| 2018 (1 Jan – 31 Dec) | +2.2% | -3.0% | -8.7% |
| Since Inception (1 Nov 2010) Cumulative | +269.6% | +128.4% | — |
| Since Inception Annualised | +17.4% | +10.6% | — |
Benchmark performance: UK Gov. Bond 5-10yr +1.2%, 3 Month £ LIBOR +0.7%.
The report does not disclose individual holdings in a table; the following summarises portfolio characteristics by geographic and sector distribution.
| Rank | Metric | Fund Portfolio (2018) |
|---|---|---|
| 1 | Investment Style | Holds 20–30 stocks, highly concentrated |
| 2 | Sector Allocation | Information Technology (35%), Consumer Discretionary (3%), Consumer Staples (27%), Healthcare (25%), Industrials (9%) |
| 3 | Geographic Distribution | United States 64%, United Kingdom 17%, Europe 19% |
Specific top ten company names and weight changes are not disclosed.
New Positions / Significant Increases (from "Largest purchases" table):
| Company | Purchase Cost (£) |
|---|---|
| 767,051,580 | |
| Reckitt Benckiser | 375,206,481 |
| Philip Morris International | 310,152,936 |
| Coloplast | 271,672,558 |
| McCormick | 270,269,295 |
Liquidations / Significant Reductions (from "Largest sales" table):
| Company | Sale Proceeds (£) |
|---|---|
| Dr Pepper Snapple | 774,215,811 |
| Nestle | 317,965,359 |
| Colgate-Palmolive | 142,149,412 |
| Waters | 6,679,414 |
| British American Tobacco | 2,054,048 |
| Item | T Class Acc | I Class Acc | R Class Acc |
|---|---|---|---|
| Ongoing Charges Figure (OCF) | 1.05% | 0.95% | 1.55% |
| Total Cost Indicator (TCI) | 1.09% | — | — |
| Fund Net Asset Value | £2.30 B | £7.75 B | £0.26 B |
| Turnover Ratio | 13.4% (self-reported; approximately 11% after cash adjustment) | — | — |
| Dividend (T Acc per share) | 2.28p | 2.68p | 0.88p |
1. Relatively strong performance: The T-class accumulation share returned +2.2% in 2018, outperforming the MSCI World Index (-3.0%) and the FTSE 100 (-8.7%); the fund ranked in the 4th percentile of the IA All Markets sector.
2. Investment discipline unchanged: The portfolio's weighted average free cash flow grew 8%, and the weighted average FCF yield rose from 3.7% at the start of the year to 4.0% at year-end (value reversion).
3. Portfolio quality significantly above the index: The fund's portfolio ROCE is 29%, operating margin 28%, and cash conversion rate 95%, all well above the averages for the S&P 500 and FTSE 100; the interest coverage ratio of 17x is twice that of index companies.
4. Judgment on major holdings: The report views Facebook's "glitch" as a buying opportunity (growth has slowed but margins remain at 42%); Dr Pepper Snapple and Nestlé were sold due to doubts about the rationale of acquisitions and capital allocation.
5. Cost control: Voluntary trading costs amount to only 1.8bp (0.018%) of the fund's average size, and the TCI (total cost indicator) is 1.09%.