Thoughts on Fundsmith

ChilliBob

Hey guys,
I've been pondering investing into Fundsmith on and off for a long while and wanted to get the opinions of members here.

I'd previously dismissed it as expensive, and performance not that dissimilar to a global tracker (or worse) recently. 

However, I'm now reconsidering based on the volatility, which is considerably lower than a global tracker, and indeed of many active competitors. And the returns have started to turn a corner a bit and improve. 

I'm looking for something middle of the road for my portfolio that will be a buy and hold.

What are peoples views on this at the moment then? You tend to find a lot of people on each end of the spectrum, they either love Fundsmith or don't see the point because tracker returns have been better and cheaper (recentish), I'm genuinely in the middle!

El_Torro

I fall in the camp of preferring trackers, for the reasons you mention. Then again if you look at the performance of Fundsmith in the last 5 years or last 3 years then the extra charges have certainly been worth paying. Last 1 year, not so much. 

Is Fundsmith really that much less volatile than a global tracker? I'm not really seeing it on the chart.

If you believe in managed funds then I think Fundsmith is a good way to go, at least for some of your portfolio. The only managed fund I've held for any length of time is a Smaller Companies fund.

I guess it depends on whether you think that Fundsmith's performance over the last year is a blip or a sign of things to come. It's certainly been an exceptional year.

moneysavinghero

Fundsmith is a very concentrated fund. No where near the number of companies you will get in a global tracker.

They only invest in high quality companies that have good cash generation and large competitive advantages. So in theory in a downturn where other companies may struggle financially the ones FS invest in should be able to weather the storm a bit better. Whether that happens in reality who knows. With the fund being very concentrated would only take one of their investments to go sour to have a major impact on the fund as a whole.

dunstonh

I have generally taken the approach not to invest in funds where the manager has their name in the fund house.   Whilst some go on to succeed, too many fail to live up to their track record when the restraints of their former employer are removed.
Fundsmith itself is more of a satellite fund than a core fund.

I'm looking for something middle of the road for my portfolio that will be a buy and hold.

That generally is not what happens with satellite funds.  The core fund is your buy and hold (unless a better tracker comes along). The core fund is the one you adjust throughout the economic cycle because its focus may not be suitable for the whole cycle.

on't see the point because tracker returns have been better and cheaper (recentish)

6 months is nothing in a cycle.  And there is good reason when you look at the underlying assets and the wider market.

moneysavinghero

Since its inception in 2010 FS has achieved more than double the return of a global index (even after taking into account the fees). So maybe the price is worth paying.

Performance is actually slightly behind the MSCI World Index for YTD.

AnotherJoe

ChilliBob said:

Hey guys,
I've been pondering investing into Fundsmith on and off for a long while and wanted to get the opinions of members here.
I'd previously dismissed it as expensive, and performance not that dissimilar to a global tracker (or worse) recently.
However, I'm now reconsidering based on the volatility, which is considerably lower than a global tracker, and indeed of many active competitors. And the returns have started to turn a corner a bit and improve.
I'm looking for something middle of the road for my portfolio that will be a buy and hold.
What are peoples views on this at the moment then? You tend to find a lot of people on each end of the spectrum, they either love Fundsmith or don't see the point because tracker returns have been better and cheaper (recentish), I'm genuinely in the middle!

Not sure where you got that from unless you happened upon at a very limited time period, on a long time period its done much better than global index funds. So not at all expensive given that.

FWIW I have a fair chunk of index funds plus some 'conviction funds' for want of a better phrase  inc Fundsmith and also Smithson, and then some out and out higher risk single company shares.  Whatever floats your boat but you are falling into the trap of thinking you can determine what a fund will do from past history, eg your "turned the corner" and similar  comments making it sound you think its now going to do well based on a chart whereas a year ago you could tell it wouldnt. When did you start looking and whats it done since then?

I expect it to do better long term than indexes but am hedging my bets, sounds like you are in a position to do the same. In some respects Smithson ought to be a better bet as its a smaller fund so winners will have more effect (OTOH so will losers).

ChilliBob

The volatility is lower than a tracker and lower than other global active funds more so (funnily enough Fundsmith have tables drawing attention to this).

As regards core and satellite, I get that but I see a collection of funds falling into each bucket really, so perhaps you have say a global tracker, fundsmith, Morgan Stanley Global Brands, Rathbone Global Opportunities etc and the core, and the satellites are (well in my case) more Thematic, more specific etc, so UK smaller companies, Commodity type etfs etc. 

It was my view core/satellite more refereed to proportions, so perhaps 70% core 30% satellite. Now if that 70% is one global tracker or say 4 funds is neither here nor there. Likewise if that 30% is 3 funds, 6 funds (more likely, at 5% each), or even more if you like to make life complicated and can be a bit faddy

ChilliBob

Regarding returns, ytd or one year annualised Fidelity world P (stupid cheap) or an s&p tracker have beaten fundsmith. Over a longer time horizon fundsmith has surpassed them, considerably so. 

bostonerimus

I've always used trackers and my reasons for avoiding an active fund like Fundsmith are; high expenses; owns too few funds; stock pickers succeed until they don't.

Thrugelmir

No vested personal interest. Fundsmith has beaten the MSCI World Index every year since 2010 bar one. An impressive track record. At least you'd avoid having exposure to overpriced stocks such as Tesla and other meme stocks. That trackers are being forced to buy in the current "hot money" times.  

Prism

I use it as a core fund in my SIPP down to the investment strategy which seems to provide good returns along with lower volatility. I haven't actually added to it in a few years mainly because the performance has been so good I have added to other funds to keep a balance. The quality theme has been working for longer than many people think - around 20 years at the moment.