Fundsmith Equity Fund
692.28p T Class Acc, 23 Jul 24

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An ISA (Individual Savings Account) is a savings account available to UK residents on which the return is tax-free and which need not be declared on the investor’s tax return. All income (dividends and interest) and all capital gains within the account are free of tax. For the current year, 6 April 2024 to 5 April 2025 the overall investment limit is £20,000 (excluding the British ISA which has a separate £5,000 limit).

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S&P Capital IQ Fund Research Assigns Gold Grading to Fundsmith Equity Fund

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S&P Capital IQ Fund Research announced today that it has assigned a Gold grading to the Fundsmith Equity Fund.

This focused global equity fund is a relatively new addition to the UK market, as is the management group. Fundsmith is a limited liability partnership founded by four partners for the purpose of managing just this one fund. All partners have money in the fund and invest on the same terms as other investors, so there is a good alignment of interest. The named manager of the fund, Terry Smith, owns more than 70% of the firm. Fundsmith's asset growth has been impressive; the fund size is £840m only two years after launch.


Smith has considerable industry experience, although his time as a portfolio manager only extends back nine years. He is supported by Fundsmith's head of research, Julian Robins and, given the partnership structure, we would expect this team to be stable over time.

The fund's objective is to outperform the MSCI World index and to beat the yield on UK gilts by 3% over the long term. The portfolio is not tactically managed; this is a fundamental buy-and-hold approach and there is no use of cash, so turnover is very low (-6.4% over the past 12 months). It is concentrated into 20-30 stocks with no formal constraints (benchmark-relative or otherwise) beyond the Ucits rules.


Smith used an identical approach as an adviser to the Tullett Liberty Pension Fund (2003-10). Combining the track records of both the Fundsmith Equity and Tullett Liberty Pension funds, the longer-term cumulative returns for this strategy are strong and equate to a top-decile positioning within our peer group over five years. The record suggests that Smith has some skill in stock selection and that the approach is resilient in down markets.


“Given the consistent research-led approach and with the backing of Smith's good track record, the fund achieves an S&P Capital IQ Gold grading,” comments Daniel Vaughan, S&P Capital IQ fund analyst.


In response, Terry Smith, founder and chief executive of Fundsmith, says: “I am delighted to have received this S&P Capital IQ grading that clearly recognises our investment principles, track record and the alignment of our investors’ interests alongside our own."