Terry Smith is known as the Warren Buffet of the UK and his fund has posted stellar returns of close to 18% per annum since inception in 2011. Like Buffet, he is into investing in good quality companies at a reasonable price.
However, unlike Buffet, he never invests in oil and gas companies and also the banks. We got to know about him when we read his book on his investment philosophy.
The reason for not investing in banks and oil and gas companies boils down to the cyclical nature of the industries. Also, there is minimal brand value and it is more of a commodities business such as the oil and gas industry. He preferred predictable and stable growth where the company could be really boring. No doubt, he will really miss out on the gains in the upcycle but he is also able to prevent losses in a downcycle. The effect of volatility on the portfolio from this mandate could be minimised too.
Would highly recommend everyone to read through this insightful book which is full of investment wisdom and more importantly, it gives you a good guideline on how to choose good quality companies.
These companies are currently under Fundsmith’s top 10 holdings:
Their fund is positioned to have their interest align with their shareholders where there will be minimal turnover which will lead to a lower expense ratio- 0.01% in 2021. The management fee is at 1% with no performance fees embedded in the structure.
The Fundsmith Fund could be a potential investment alternative once Buffet and Munger are no longer around- Terry Smith is just 68 years of age and hence there is still a long runway.
The stocks Terry choose are usually those that have a long track record – decades- and have experienced several downturns. This is necessary to validate the resilience of the business that he buys. His main focus would be on healthcare, consumer staples, consumer discretionary and technology.
Just like Berkshire, they also hold annual meetings where they discuss the fund’s performance and their views of the market. For this year, it was a virtual event. They shared about the merits of investing in Amazon, Unilever and Meta. The effect of war and inflation was also covered.
Here is the link for the full video to the annual meeting:
https://www.youtube.com/watch?v=Ha2zG4sVTeo&t=8s
In a nutshell, this is a fund that we could consider for our retirement funds. It is only available to accredited investors for those based in Singapore.
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Performance Fundsmith Berkshire
5 years: 83% 105%
1 year: 7.4% 38%
6 months: -8.3% 24%
3 months: -11.4% 17%
Nope sorry, Terry Smith isn’t quite like Buffett yet. He focuses more on growth companies that do better in strong economy & low interest rates.
Thanks for the comment. My personal thought would be they are both looking at top-notch quality companies with great returns on capital. Berkshire has come up strongly in the recent few months and outperforming ARKK too. Fundsmith is almost a 6 bagger since inception in 2011 and hence a fund manager that we should look out for.