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The Share Centre’s fund to watch: Fundsmith Equity

adamlewis
Written By:
adamlewis
Posted:
Updated:
21/02/2024

Kirsty Edwards, investment analyst at The Share Centre, chooses Fundsmith Equity as this month’s featured fund.

“The fund manager, Terry Smith, gained a wealth of knowledge and experience from his time as an investment adviser to a Pension Fund at Tullet Prebon. He launched the Fundsmith Equity fund in 2010 which now stands at £4.29bn assets under management. The fund invests in global equities with a long-term ‘buy and hold’ strategy. Since inception it has remained in the first and second quartiles, consistently outperforming the sector. Year-to -date, the fund has returned 12.4% compared with 3.4% from the sector average.

“The portfolio is defined more by the companies it will not invest in than those it will. Terry opts for defensive companies who are resilient to change, specifically to technological innovation, and who have existing advantages that are difficult to replicate. The criteria defines companies which have a high certainty of growth resulting from the reinvestment of cash flows and which do not require significant leverage to generate returns.

“Currently, the fund has 57% of its exposure to the US and 27% to the UK. At present, the main sectors of focus are in consumer staples, technology and healthcare. Big household names such as Microsoft, Johnson & Johnson and Unilever are present in the portfolio. Due to the stringent criteria shaping the fund, the manager steers clear of sectors such as Banks, Real Estate, Biotech, Insurance and Oil & Mining. The portfolio will generally consist of between 20-30 stocks.

“The Fundsmith Equity fund provides an opportunity to investors who are seeking a management team with a strong track record and a long-term investment strategy.”

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