Last Updated on by Tree of Wealth
The information presented in this article was pertinent when it was originally published. However, as circumstances are constantly evolving, it is advisable to exercise prudence when relying on any of the content in this article.
As of 31 March 2022, the Fundsmith Equity Fund reported that over the course of 11 years they have delivered 395.39% performance net of fees. They’ve outperformed almost all mutual funds available in Singapore, including banks, and they have also performed better than the S&P 500 index, known even to amateur investors as one of the best markers of equity in the United States.
Disclaimer: This is by no means an investment advice. Do your due diligence when it comes to investing. As the Fundsmith Fund is an equity fund, it’s risk exposure may not be suitable for everyone. You should also know that that while investments may have a high return, past returns does not equate to future performances and there is a chance principles may be lost, as with all investment instruments. Should you be interested, do seek professional Financial Avisors whom can give you advice.
Fundsmith performed astonishingly well even during the COVID-19 peak years, and this has led many to be curious about how they are doing so well, as well as how Singaporean investors might be able to get a bit of this action.
As such, this article will cover exactly what Fundsmith is and what their beliefs are, why it is good, what they’re investing in, and how you can invest in them as well.
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So, what’s the Fundsmith Equity Fund?
Fundsmith, founded by Terry Smith, is a fund management company that is located in the U.K.; Smith, who is regarded as the U.K.’s own Warren Buffet, has won several awards for his work. Their no-nonsense approach has the fund investing in great companies globally over the long term; the fund does not take on short term profit approaches. A Fundsmith equity fund review notes that many have specifically requested financial advisors to look out for them specifically.
Their fund size is currently around £25.5bn at 29 holdings, with the average market cap of each holding being £92.4bn and most of them having been founded in the early 1900s – that is, these are companies with long, long histories of success. About 74% of the companies they have invested in are located in the United States.
Cool, But Why Is It So Good?
Fundsmith invests in a relatively niche way. Instead of investing in every potentially good company that comes their way, they carefully curate their portfolio for businesses that can sustain high returns, whose unique value propositions serve as a high barrier to entry in replication, that are adaptable to changing circumstances and disruptive innovations.
While they are well aware that this approach drastically limits potential choices for their portfolio – about 20 to 30 stocks – this method makes them laser-focused and capable of delivering high results and returns on the investors they work with them.
On top of that, Fundsmith also does not invest in any derivatives; this is to ensure that they have direct exposure to the companies they are investing in, so that this knowledge and reduced degree of separation may guarantee higher chances of return.
Fundsmith’s Promise
No Fees for Performance
No Upfront Fees
No Nonsense
No Debt or Derivatives
No Shorting
No Market Timing
No Index Hugging
No Trading
No Hedging
No Fees for Performance
No Upfront Fees
No Nonsense
No Debt or Derivatives
No Shorting
No Market Timing
No Index Hugging
No Trading
No Hedging
Source: Fundsmith
Well, what are they investing in then?
Per their website, Fundsmith’s portfolio is 32.4% consumer staples companies, then 27.1% in tech and 22.1% in healthcare. In short, Fundsmith primarily invests in essentials and technological advancement. They’ve noted that the top 10 Fundsmith holdings consist of the following companies:
- Microsoft – a major tech company
- Novo Nordisk – a pharmaceutical company
- Philip Morris – a tobacco company
- L’Oréal – a personal care company
- IDEXX – product development for pets, people, livestock
- Estée Lauder – a personal care company
- McCormick – a food FMCG company
- Stryker – a defence company
- Pepsico – a food FMCG company
- Intuit – a financial software company
You will notice that while many of these names are familiar, a lot of them also aren’t. On the other hand, there are many names you might generally expect in a ‘top 10’ that don’t appear.
What principles do they follow to make them so successful?
As can be seen from above, Fundsmith believes firmly in the work they do. They carefully analyse each and every potential holding and keep themselves to a very small number of them in order to maximise the growth of their investments. They also are not interested, as mentioned, in short-term investments; an example they gave was in regards to the Dotcom mania:
“If you weren’t invested in technology stocks in that period (and we wouldn’t have been) then you would have underperformed the market. We would be happy to have done so, as we would never own a share in a company which we did not think was both good and at worst fairly valued. We would not own something because it is fashionable and might go up. Because eventually it goes down. Usually by a lot.”
– Fundsmith’s Owner’s Manual (Fundsmith Fund factsheet)
Another approach they follow is also the understanding that once they have identified a good company to hold onto, they will f once they have invested in it – in essence, they aim to hold every company for a long, long, long, long time, and do not react to fads by buying or selling at every rise or drop. This is an incredibly valuable strategy and has shown quite well in Fundsmith’s results over the past decade. Given more time, they may be able to demonstrate how their fund performs even better. Keep an eye out for Fundsmith news.
How can I invest in Fundsmith Fund in Singapore?
In Singapore, there are several ways of investing in Fundsmith; for those who want to invest directly, it would be as an Accredited Investor.
How To Be Qualified As An Accredited Investor
- Minimum income of S$300,000 in the last 12 months (or its equivalent in a foreign currency)
- At least S$2 million of net personal assets, of which the net value of your primary place of residence can only contribute up to S$1 million
- At least S$1 million value of Net Financial Assets (or its equivalent in a foreign currency)
Source: DBS
How Retail Investors Can Invest In Fundsmith Fund
Although it is not available for retail investors to invest in the fund directly, retail investors however can also invest in Fundsmith in Singapore through ILPs – Investment-Linked Portfolios.
The premiums you pay are first used to invest in the Fundsmith fund in Singapore. This works even at the smaller premium amounts because the premiums of large numbers of ILP investors are pooled together to make one great investment in Fundsmith.
These are 101% ILPs (different from the 105% ILPs that have higher cost of insurance) and all your funds will be invested into the funds of your choosing. For many who are already paying premiums for insurance, ILPs provide a chance to use their money in investments on top of having insurance, a way to doubly ensure that your money is put to use growing your wealth rather than simply sitting passively in a savings account. In this aspect, the insurance element protects your wealth in the event of death. It does not pay out exceedingly in the event of Death or diagnosis of Critical Illness, as that will cost and definitely going to charge the investor.
Find out more: Best Investment- Linked Policy Detailed In-Depth Comparison Singapore
This is invaluable for retail investors because ILPs also allow access to many funds that would otherwise be inaccessible – including the Fundsmith equity fund price.
What To Do Next?
To find out how you can invest in Fundsmith fund, it is advised to speak with a professional Financial Advisor to better assess your concerns and most importantly, your investment objectives, time horizon you are looking at, the returns you are expecting as well as your risk appetite.
Interested to learn more?
Fill in the form below and we will get back to you!
With returns ranging from 17% to an all time high ranging 22% to 25.6% (2019), the Fundsmith Fund is ranging from moderately aggressive to aggressive risk profile and is important to know that the volatility is high. With high returns, come high risks.
Remember as always, do your own due diligence when it comes to investment.
To that end, do approach our advisors by filling the form below for a discussion on the Fundsmith Equity Fund if you are interested; our licensed Financial Advisors are more than happy to talk with you about whether or not the fund would be suitable for your investment needs and risk profile!
As always, they are non-obligatory, no hidden fees and all advice are of no charges.
