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 breaks down the Fundsmith Equity Fund's first-half 2023 results. The fund returned 8.5%, slightly behind the global stock market. The manager sold Amazon and Adobe, worried about wasteful investments (i.e., moving into low-return businesses outside their core), and bought Procter & Gamble and Unilever. For everyday investors, it's a reminder to focus on companies that stick to their strengths. Worth reading for a glimpse into a pro's disciplined approach—no macro bets, just quality.
In the first half of 2023, the Fundsmith Equity Fund (T Class Acc) rose by 8.5%, slightly underperforming the MSCI World Index's 8.9%. The most notable portfolio moves during this period were the complete liquidation of Amazon and Adobe, as manager Terry Smith expressed concerns over their capital a
| Metric | H1 2023 | Since Inception (Cumulative) | Since Inception (Annualized) |
|---|---|---|---|
| Fundsmith Equity Fund (T Class Acc) | +8.5% | +527.1% | +15.6% |
| MSCI World Index (£ Net) | +8.9% | +288.5% | +11.3% |
| UK Bonds (5-10 Year) | -3.4% | +15.7% | +1.2% |
| Cash (£ Rate) | +2.0% | +10.0% | +0.8% |
Note: The fund does not reference any benchmark; the above is provided for comparative reference.
The report does not disclose a complete list of the top ten holdings, only providing geographic and sector distributions.
Geographic Distribution (by Listing Location)
| Region | June 30, 2023 | December 31, 2022 |
|---|---|---|
| United States | 69% | 72% |
| Europe | 26% | 23% |
| United Kingdom | 5% | 5% |
Sector Distribution
| Sector | June 30, 2023 | December 31, 2022 |
|---|---|---|
| Consumer Staples | 34% | 34% |
| Healthcare | 25% | 26% |
| Consumer Discretionary | 11% | 12% |
| Information Technology | 10% | 10% |
| Communication Services | 8% | 4% |
| Industrials | 5% | 6% |
| Financials | 4% | 4% |
| Other Net Assets | 3% | 4% |
Largest Buys (by Cost)
| Company | Cost (£) |
|---|---|
| Procter & Gamble | 497,938,082 |
| Unilever | 260,406,885 |
| Apple | 96,180,025 |
| Church & Dwight | 90,161,117 |
| Visa | 25,131,509 |
| LVMH | 20,165,476 |
Largest Sells (by Proceeds)
| Company | Proceeds (£) |
|---|---|
| Adobe | 551,281,458 |
| Amazon | 525,254,260 |
| Church & Dwight | 198,223,741 |
| IDEXX Laboratories | 186,005,801 |
| Estée Lauder | 55,079,981 |
Notable Actions Mentioned in Manager Commentary:
| Item | Value |
|---|---|
| Total Fund Size (T Class Acc+Inc+R Class Acc+Inc+I Class Acc+Inc) | £23,606,379,278 |
| OCF (T Class Acc) | 1.04% |
| OCF (I Class Acc) | 0.94% |
| OCF (R Class Acc) | 1.54% |
| Portfolio Turnover (H1 2023) | 6.2% |
| Voluntary Transaction Costs (H1 2023) | £1,192,657 (0.005% or 0.5 basis points) |
| Total Investment Cost (T Class Acc, incl. transaction costs) | 1.06% |
| Dividend (T Class Acc, per share) | 0.52p |
1. Performance Attribution: The top five positive contributors were Meta (+3.1%), Microsoft (+2.6%), L'Oréal (+1.5%), LVMH (+1.1%), and Amadeus (+1.0%); the top five detractors were Waters (-1.2%), Estée Lauder (-1.2%), ADP (-0.6%), Mettler-Toledo (-0.4%), and Philip Morris (-0.4%).
2. Rationale for Liquidation: The sales of Amazon and Adobe were driven by concerns over capital allocation errors — Amazon's CEO announced an entry into grocery retail, contradicting the firm's own stated investment principles; the manager notes that companies deviating from core strengths into low-return areas typically destroy value.
3. Current Fundamentals: Revenue growth for technology companies has slowed (Microsoft from 18% to approximately 7%, Meta from >20% to about 8%); healthcare companies have performed steadily (Stryker up 13%, Novo Nordisk up 25% driven by weight-loss drug Wegovy); consumer goods companies face input cost pressures (P&G gross margin fell from 50% to 47%, Estée Lauder from 80% to 72%).
4. Valuation Changes: The portfolio's free cash flow yield declined from 3.2% at end-2022 to approximately 2.8% at end-June 2023, due to rising share prices and impaired cash flow conversion; the portfolio's valuation has exceeded that of the S&P 500 Index.
5. Macro Stance: The manager explicitly states that investments are not based on macroeconomic or geopolitical forecasts (no views on interest rates, recession, Ukraine, or Taiwan issues), and insists on holding high-quality companies for the long term, relying on their intrinsic compounding ability to determine long-term performance.