The multimillionaire boxing-mad son of an east London bus driver proclaimed to Guardian Money readers last December he would give Britain's "fat and complacent" fund management industry a bloody nose. His new low-cost fund would strip out trading costs, banish commission and sell direct to small investors. The one-year performance figures are now in – and it's round one to Terry Smith, with the industry firmly on the ropes.
There are more than 2,300 funds that UK investors can choose from, and over the past year they've managed to lose, on average, 11% of investors' money. But Terry Smith's Fundsmith Equity is enjoying a year-on-year gain of 6.4% despite the worsening economic blizzard that has battered stock markets.
Behind his success is a simple formula: buy shares in companies that make basic necessities – from toilet paper to nappies, baby food to pet food, soap to shampoo. No matter how hard austerity bites, western consumers will keep buying basics, while newly affluent consumers in China and India are buying for the first time.
It's why his portfolio of just 20 companies includes names such as Unilever (makers of PG Tips, Flora, Dove, Persil and Domestos), Procter & Gamble (Ariel, Pampers, Olay, Duracell) and Imperial Tobacco (Lambert & Butler, Gauloises, John Player Special, Rizla). Makers of what analysts call these "consumer staples" have, in most cases, seen their share prices defy the downturn – Unilever is trading at £21 a share compared with £18 a year ago, Procter & Gamble has edged ahead from $62 to $64, while Imperial Tobacco is changing hands at £23 a share, compared with less than £19. Smoking is in decline in the west, but elsewhere across the world new addicts light up every day.
Among the 270 funds in the "global" sector of the fund management industry, Fundsmith Equity has entered the one-year performance tables in third place, behind a Morgan Stanley fund invested in global brands, and a Legal & General fund which focuses on health and pharmaceuticals.
Perhaps unsurprisingly, money has gushed into the fund from investors large and small. Fundsmith Equity started with £25m, mostly Smith's own cash, but is now £200m and growing fast.
Already cited as Britain's answer to Warren Buffet, Smith says the key to making money from shares, is sticking to…
Really dislike how my post gets crunched up into one large quote .... I did make a few comments......................but it has disappeared!!!
Anyway briefly......1.5% Annual fee which can be taken out of the dividends as yield is 2.5% for a fund that is relatively defensive with global exposure to top companies, seems good value considering one has to pay brokerage and commision anyway. FUM has increased significantly since inception, certainly growing in popularity from £25m-£400m in 17 months.
Worth watching shareholder meeting on website : https://www.fundsmith.co.uk/Home.aspx
What do you think ?
