HL vs. Terry Smith

aroominyork

Fundsmith has tried to get onto HL’s Wealth 50/150 list for some time but failed to do so. Perhaps it was because Fundsmith would not give HL the obligatory fund charge discount – even though, until recently, HL tried to make us believe the discount didn’t influence their decision of which funds it promoted in its Wealth list.

Terry Smith does not mince his words about HL. He believes that by any objective measure his fund should be on their Wealth list and that HL is not serving its clients’ interests by omitting Fundsmith.

HL’s standard wording for funds not on its Wealth list reads “This fund does not feature on our Wealth 50 list of what we believe are the best funds in each sector. If a fund is not within our Wealth 50 this is not necessarily a recommendation to sell. However, if you are thinking of adding to your investments, we believe the Wealth 50 is a good place to start.” That’s not madly subtle, is it? It suggests i) if you have even a modicum of sense you will sell any non-Wealth holding, and ii) it goes without saying you wouldn’t actually consider buying a fund not on our list.

But Terry now seems to have HL on the defensive because HL’s website gives a reason for excluding Fundsmith, something it hardly ever does. It reads “Terry Smith uses a simple but effective approach: invest in good companies at reasonable share prices and hold them for the long term. It's helped drive the fund's strong performance, though this isn't a guide to future returns. The fund isn't currently on the Wealth 50. Terry Smith's track record is much shorter than other fund managers in the global sector. We also think the fund is expensive. We prefer to back managers with longer records of exceptional performance that can be bought at a more attractive price.”

Regarding fees, while many Fundsmith owners (including myself) know that many other global funds are cheaper than 0.95%, we swallow the extra pips as a price worth paying for the return we get.

More interesting is HL’s comment about Terry’s ‘short’ track record. I have read commentators say he had a similar style and a good record in the firms he worked for before setting up Fundsmith. But consider the funds HL does currently promote. Its Wealth 50 includes only three actively managed global funds, one of which is Jupiter Global Value Equity. This is managed by Ben Whitmore – historically a UK equity manager – and was launched as recently as March 2018 since when, incidentally, it is down 7% compared to the global sector being up 17%. HL’s research page reads “Even though Ben Whitmore's global track record is short, his wider experience and disciplined approach lead us to believe he stands a great chance of success.” Yup, I’d say two years’ experience is just a wee bit shorter than Terry Smith’s.

Can anyone explain how HL (as they congratulate themselves on offering a 0.40% discount on Whitmore’s 0.93% fund charge) take themselves seriously?

Moe_The_Bartender

Fundsmith hasn’t tried to get on HL's wealth list. He doesn’t give a toss about them. All he has ever done is point out HL's hypocrisy and say that he isn’t prepared to reduce his charges to get on their list.

FS is my biggest holding by far and if it costs me .95% to get the kind of returns that Smith delivers, why would I want to pay a little less for an inferior product? For years, HL had utter dogs on its list like Neptune Russia and BlackRock UK Absolute Alpha. Different products but any one investing in them needed certifying.

george4064

Generally speaking, I have always ignored HL’s Wealth 150/100/50 list. Many years ago I invested at launch in the Newton Emerging Income Fund (now BNYM Emerging Income). The Accumulation fund has returned circa 10% since its launch in October 2012. I have since sold the fund but I feel embarrassed that I get swept up in all the HL hype and marketing.

It seems the fund is no longer in the Wealth 50, but I can’t find when it was dropped.

Im so glad that HL is behind me now having transferred all my investments to AJ Bell, much happier where I am now.

ColdIron

As the UK's largest retail fund, at £20 billion odd, I don't think Smith is all that fussed about HL. There have always been many anomalies within the W150 W50 and it's omission just reinforces the perception that it's a paid for marketing tool

aroominyork

Moe_The_Bartender said:

Fundsmith hasn’t tried to get on HL's wealth list. He doesn’t give a toss about them. All he has ever done is point out HL's hypocrisy and say that he isn’t prepared to reduce his charges to get on their list.

ColdIron said:

As the UK's largest retail fund, at £20 billion odd, I don't think Smith is all that fussed about HL. There have always been many anomalies within the W150 W50 and it's omission just reinforces the perception that it's a paid for marketing tool

I think those are better descriptions of TS's view than mine was. There were many stories in the press last year with titles such as "Terry Smith slams Hargreaves over Wealth 50 exclusion" but when you read them they are criticising HL rather than bleating about Fundsmith's omission.   

Sailtheworld

He'd love to be on that list. It's the first port of call for the gullible. He just doesn't want to pay.

AnotherJoe

I suspect if you picked 50 (or is it 49 now ha ha) random funds to buy, omitting any if they were on the W̶5̶0̶, W49, the non W49 funds would do better.

talexuser

Report after report shows the list is rubbish if you really want the long term active outperformers (and it is doubtful you could find 50, let alone 150)
https://www.yodelar.com/insights/hargreaves-lansdown-wealth-50-review?utm_source=hs_email&utm_medium=email&utm_content=88283402&_hsenc=p2ANqtz-9iubj3L3pVHLAgTTf3VzgNLL25n2j_S8bX5uWBz9d1AwmOM0LQzz2dfWiudpZNIGY3cx2FwrPw3uX2y50amsXPL7d-tQ&_hsmi=88283402
an eye opener.

RolandFlagg

Is Terry Smith a one man band, or head of a team?
If the former, what would happen to the fund if anything happened to him?
Surely there would be issues with clients trying to get their funds out?

Prism

RolandFlagg said:

Is Terry Smith a one man band, or head of a team?
If the former, what would happen to the fund if anything happened to him?
Surely there would be issues with clients trying to get their funds out?

Terry Smith is the founder and CEO of Fundsmith (the company) which employees a small team. The company runs three main funds - Fundsmith, Smithson and FEET. If he retires then management of the main fund passes over to Julian Robins so nothing should change. I'm sure that some clients would withdraw their cash out of the main fund but that would have little to no effect on those that stay in.

2unlimited91

Isn't the real contest: who is more blatantly over-charging? HL, with a platform fee of 0.45% on £100bn assets; or Fundsmith, with a management fee of 1% on £20bn assets?