Fund in Focus: Fundsmith Equity

Morningstar analyst Peter Brunt explains why conviction remains high in this fund's ability to outperform in the long term - and why it retains its Gold Rating

Peter Brunt 2 April, 2019 | 7:49AM

Terry Smith

This is one of the strongest options for investors seeking exposure to high-quality global equities. Terry Smith co-founded Fundsmith LLP and launched this strategy in 2010 on the back of the success he achieved as investment advisor to the Tullett Prebon pension fund. His experience in the industry dates back to 1974 and has included time in research and in senior management positions at FTSE companies.

He is an original thinker and has often demonstrated his willingness to bet against the crowd by taking a longer-term view. The investment philosophy is to buy and hold, ideally forever, high-quality businesses that will continually compound in value. High-quality companies are defined as having little need for leverage and an ability to sustainably grow an above-average cash return on operating capital employed. When considering these criteria, and a minimum $2 billion market cap to keep the strategy scalable, the investable universe is significantly reduced to a shortlist of around 70 names for deep-dive analysis. Smith is supported here by Julian Robins and Daniel Washburn. Robins is a co-founder of Fundsmith and has worked with Smith for over two decades. Washburn's experience is limited to Fundsmith, which he joined in 2011.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Peter Brunt  is a Senior Fund Analyst for Morningstar UK

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