Rated Fund 2013-2017. A straightforward recipe for success
Fundsmith Equity won Money Observer's Best Large Global Growth Fund award in 2016. It was launched in 2010 by City veteran Terry Smith and in just over six years it has grown to more than £9 billion in size. His approach is to pick a small selection of shares and stick with them.
The fund currently holds 27 shares with over 60 per cent in the US market. He buys long-established firms with big brands and a high return on capital. He also favours businesses with advantages that are difficult to replicate.
Smith believes it is virtually impossible to predict which way stock markets will move, but that the strength of the companies the fund holds will allow them to continue to grow their intrinsic value.
He is scathing of other managers, and is sceptical when others talk about diversification and/or the belief that they can buy poor-quality companies when their fortunes and share prices are depressed and about to improve and sell them close to, or preferably just before, they turn down.
He says he cannot understand why other investors assume that it is better to be diversified across low-quality investments than to be concentrated in high-quality ones.
On market timing, he says the performance record of the vast majority of active managers would suggest that there are far more who think they can play the investment and business/economic cycle successfully and outperform, than can actually do so.