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 breaks down Fundsmith's 2019 mid-year report. The fund returned 24%, beating the global stock average of 17%. It holds quality companies like Microsoft and PayPal, and sold Colgate-Palmolive due to slow growth. The manager doesn't buy small stocks and says 61% of holdings can be sold within a week. For ordinary investors, it shows how a low-turnover, high-quality stock-picking strategy can outperform over time.
Fund H1 2019 return +23.9%, outperforming the MSCI World by approximately 6.8 percentage points. Manager Terry Smith fully exited Colgate-Palmolive (sold £74M), stating that after waiting for a new growth strategy to no avail, he decided to free up portfolio space.
Representative share class: T Class Acc (Reporting period: H1 2019 vs. Benchmark)
| Item | Fund (T Class Acc) | MSCI World | FTSE 100 | UK Gilts | Cash |
|---|---|---|---|---|---|
| H1 2019 Return (01.01–28.06.2019) | +23.9% | +17.1% | +13.1% | +3.1% | +0.4% |
| Annualised Return Since Inception | +19.2% | +12.0% | +7.2% | +4.0% | +0.6% |
(Source: Performance table on page 8 of the report; T Class Acc H1 2019 NAV return of 23.78% differs slightly from the +23.9% shown above — the manager commentary uses actual trade prices)
The report does not disclose the list of top 10 holdings at the period end.
The "Summary of significant changes" in the report discloses the largest purchases and sales (six months ended 30 June 2019):
Largest Purchases
| Company | Purchase Cost (£) |
|---|---|
| McCormick | 384,407,076 |
| Philip Morris International | 123,364,060 |
| Reckitt Benckiser | 71,837,630 |
| Sage | 51,154,391 |
| L'Oréal | 48,186,130 |
Largest Sales
| Company | Sale Proceeds (£) |
|---|---|
| Colgate-Palmolive | 74,387,143 |
| InterContinental Hotels | 29 |
(Additionally, small sales of British American Tobacco, Procter & Gamble, and Davide Campari–Milano occurred due to in specie transfers)
| Metric | Value |
|---|---|
| Ongoing Charge Figure (T Class Acc) | 1.05% |
| Ongoing Charge Figure (I Class Acc) | 0.95% |
| Ongoing Charge Figure (R Class Acc) | 1.55% |
| Total Fund AUM (as at 30.06.2019) | £18,403.4M (approx. £18.4 billion) |
| Portfolio Turnover (Manager Commentary) | -5.3% (negative due to net cash increase in the period) |
| Dividend per Share (T Class Acc) | 2.20p (retained for reinvestment within the half-year) |
The core views of the named manager, Terry Smith, in the half-year report commentary:
1. Outperformed Major Indices: The fund returned +23.9% in the first half, outperforming the MSCI World by over 6 percentage points and the FTSE 100 by over 10 percentage points.
2. Top Five Contributors: PayPal (+2.29%), Microsoft (+1.92%), Facebook (+1.80%), IDEXX Laboratories (+1.73%), Estée Lauder (+1.69%). The performance of Facebook after its controversy was particularly reassuring.
3. Top Five Detractors: 3M (-0.16%), Colgate-Palmolive (0.00%), Reckitt Benckiser (+0.20%), Johnson & Johnson (+0.34%), Coloplast (+0.43%). Overall impact was minimal.
4. Exited Colgate-Palmolive: After waiting for a new growth strategy to no avail, and with the position becoming too small relative to the fund's growth, the decision was made to sell in order to free up portfolio space.
5. Fund Liquidity: The portfolio's average market capitalisation is £116.3 billion. Based on liquidity indicators, approximately 61% of the portfolio (about £11 billion) could be liquidated within seven days. The fund holds no unlisted or illiquid securities.