Fundsmith Emerging Equities Trust Plc

Emerging Markets

Update: 6 August 2019: Fundsmith Emerging Equities - on performance watch
Full details regarding why we have taken this decision can be found here.

New for 2019. Opportunity for a bargain

We are a fan of star fund manager Terry Smith’s no-nonsense investment style and have added his Fundsmith Emerging Equities Trust as our wildcard choice, thanks to the chance to buy it at a knock-down price.

Shares in the trust have mostly traded on a premium to net asset value since its inception in 2014 – at times creeping into double digits – but slipped to a discount last year after the share price failed to keep pace with a sharp recovery in the portfolio following ‘Red October’.

Although there is the danger that the discount will widen further (many of the trust’s competitors are on double-digit discounts to net asset value), the portfolio is relatively defensive, making it one of the ‘safer’ emerging market options.

Smith believes the largest constituents of the MSCI Emerging & Frontier Markets index are not of sufficient quality for the portfolio, citing the risks of cyclicality, leverage, opaque accounting, lack of clear ownership rights and inadequate financial returns.

His focus on the sustainability of returns leads him away from financials and heavily cyclical sectors and into consumer staples, which represent almost 70% of the portfolio, compared to less than 7% of the index.

India bucked wider emerging markets in 2018 with a modest return over the year and remains the trust’s largest single-country exposure at close to the maximum country limit of 40% of the portfolio.

It is significantly underweight China. Not holding the Chinese tech stocks that drove recent returns in Asia did the most damage to relative performance in 2016. The effect of this will fall out of three-year return figures later this year.

Narrative and ratings content all as of January 2019.

See all Money Observer rated funds
Name
Fundsmith Emerging Equities Trust Plc
Manager
Fundsmith LLP
Type
Closed Ended Investment Company
ISIN
GB00BLSNND18
Sector
Global Emerging Markets
Launched
25/06/2014
OCF
1.52 %
Risk Rating
1
3 Year Sharpe
0.18
3 Year Alpha
-5.90
Yield
0.2 %
Benchmark
MSCI EFM GR USD
Fund Size
£ 303.7 million
NAV
1,267
Gearing
97
Discount Premium
-10
To provide Shareholders with an attractive return by investing in a portfolio of shares issued by listed or traded companies which have the majority of their operations in, or revenue derived from, Developing Economies and which provide direct exposure to the rise of the consumer classes in those countries.
Holding %
Vitasoy International Holdings Ltd 6.74 %
Foshan Haitian Flavouring and Food Co Ltd Class A 5.96 %
Eastern Tobacco 4.48 %
Britannia Industries Ltd 4.22 %
Godrej Consumer Products Ltd 3.85 %
Marico Ltd 3.72 %
Philippine Seven Corp 3.67 %
MercadoLibre Inc 3.38 %
Hindustan Unilever Ltd 3.20 %
Asian Paints Ltd 3.19 %
Region %
Asia - Emerging 60.28 %
Africa 13.72 %
Latin America 11.20 %
Asia - Developed 8.60 %
Sector %
Consumer Defensive 69.72 %
Healthcare 10.25 %
Consumer Cyclical 8.90 %
Name
Fundsmith LLP
Address
W1G 0PW, London, United Kingdom
UCITS
No
Legal Structure
Closed Ended Investment Company

Managers

Michael O'Brien
Joined 05/31/2019

Michael joined Fundsmith almost a year prior to the launch of FEET and was instrumental in the development and launch of the Company. Prior to Fundsmith, Michael worked at Canaccord Genuity (formerly Collins Stewart) where he spent more than a decade as an analyst covering a wide range of sectors and geographies, developing the company's research product and institutional franchise. Michael began his career at Guinness Flight Global Asset Management (subsequently Investec Asset Management) in 1994 as an analyst before taking responsibility for the group's UK Small and Emerging Companies Funds in 1997, and subsequently the Recovery Fund. Michael holds an MPhil from Cambridge University.

Sandip Patodia
Joined 05/31/2019

Sandip joined Fundsmith from Morgan Stanley, where he had been a Vice-President within the UK Investment Bank from 2009 to 2013, providing corporate finance advice to UK listed companies on all aspects of their interaction with the equity markets. From 2005 to 2009, he qualified as a Chartered Accountant and worked as an M&A adviser at Ernst & Young. Sandip obtained a scholarship to Aston University and holds a first class honours degree in Electronics and Computer Science.

Data provided by Morningstar.

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You should be aware that prices may fall as well as rise and that the income derived can go down as well as up. When buying or selling any investment that fluctuates in price or value you may get back less than you invested. Past performance is not necessarily a guide to future performance.