Fundsmith Equity Fund

Fund Snapshot

Fund Name	Fundsmith Equity Fund
Inception Date	1 November 2010
Fund Size	£22.6 billion (as of 31 Jan 2023)
Benchmark	MSCI World Index (Net, GBP)
Fund Type	UK OEIC: £22.5bn Luxembourg SICAV: €8.0bn Delaware L.P.: $1.0bn Mauritian Feeder: $467.0m
Ideal Investment Horizon	Long-term
Investor Profile	Suitable for those seeking long-term capital growth via high-quality global equities with low turnover and disciplined valuation

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About Fund Manager

Terry Smith, Fund Manager

Terry Smith graduated in History from University College Cardiff in 1974 and earned his MBA from Henley in 1979. He began his career at Barclays Bank and became a top-rated bank analyst at W Greenwell & Co. In 1992, his book Accounting for Growth led to his dismissal from UBS, after which he joined Collins Stewart. He became CEO in 2000 and led its IPO, later building Tullett Prebon into a major inter-dealer broker. In 2010, he founded Fundsmith, where he serves as CEO and CIO. In 2012, he was honoured by New Zealand for his campaign to commemorate Air Marshal Sir Keith Park.

Investment Strategy

1. Only Invest in Good Companies

Fundsmith targets companies with:

High cash-based ROCE (Return on Capital Employed)
Growth driven by reinvestment of internal cash flows
Strong competitive moats (brands, distribution, franchises)
Predictable, repeat small-ticket transactions
Low debt dependency

2. Don’t Overpay

Valuation is driven by:

Free cash flow yield (current vs 4–5 year forecast)
Relative attractiveness within the portfolio, wider universe, and market
Comparison against bonds

As of 31 Dec 2022:

Fund FCF Yield: 3.2%
FTSE 100 (non-financials): 5.1%
S&P 500 (non-financials): 3.4%

3. Do Nothing

Ideal holding period: Forever
Voluntary exits only when: fundamentals weaken, valuations become excessive, or better opportunities arise
No panic-selling during market sell-offs

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Fund Overview

The Fundsmith Equity Fund follows a straightforward, long-term investment philosophy built on three core principles:

Only invest in good companies
Don’t overpay
Do nothing

The fund seeks to own high-quality businesses that generate high returns on operating capital employed, require little leverage, enjoy durable competitive advantages, and reinvest their cash flows efficiently. It avoids businesses vulnerable to disruption or heavy in cyclical exposure.

The fund does not market-time, hedge, short, or trade frequently, and maintains a highly concentrated portfolio of 20–30 stocks drawn from an investible universe of 80 companies.

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FAQ's

Fundsmith Equity Fund

About Company

1. Only Invest in Good Companies

2. Don’t Overpay

3. Do Nothing