How London High-Flyer Dodged Covid to End Up on Top

How London High-Flyer Dodged Covid to End Up on Top

A recent article in The Guardian profiles fund manager Terry Smith and the 10-year anniversary of his Fundsmith Equity fund, now the “biggest and most successful mainstream fund in the UK” with £22 billion in assets.”

The article reports that this year, despite the pandemic, Smith’s fund has “delighted his growing army of investors yet again, with a return of 13%” as the FTSE 100 has “languished significantly below its January levels.”

Smith, described as “Britain’s answer to American stock market hero Warren Buffett,” follows an investing approach that dictates, “Buy good companies. Don’t overpay. Do nothing.” The fund sticks to a core group of holdings (around 20 or so) with low turnover (below 5%) and “miniscule” expenses of 0.014% per annum. According to Smith, the fund still holds 10 of its original stocks and he insists that although its top three holdings are Microsoft, PayPal and Facebook, returns come from a broad base of companies.

Although Smith reportedly avoids making “major geopolitical or economic calls,” the article notes he believes there could be opportunity in the “wreckage of coronavirus.” Smith cites the aftermath of the Spanish flu pandemic of 1918-1919 and how widespread deaths led to a decline in the labor force and, in turn, adoption of assembly lines for mass production. He describes today’s environment: “After all, the productivity of many people has risen as they no longer have to commute to work or engage in business travel.”

The article notes that Smith invested £25 million of his own cash into the fund at its launch, funds that remain there today.