Fundsmith risk and protections

JakeMM

Ignoring the risks of any individual stocks within a portfolio falling in value, or the publicly traded companies going out of business - what specific risks do I have investing in a private company like Fundsmith?

As a private company, can Fundsmith themselves go out of business? And if so, what happens to my investments within the fund at that point? 

Thrugelmir

The investments will be ring fenced and held seperately from the trading activities of the company itself.  A primary purpose of the company being audited annually and the rules in the UK for corporate governance etc. As Fundsmith make their money from the AUM unlikely there'll go bust anytime soon. 

Linton

If Fundsmith as a business were to close down its funds and customers would probably be sold to another fund manager.  They are a valuable asset.

dunstonh

what specific risks do I have investing in a private company like Fundsmith?

Fundsmith is an LLP and does not have shares listed to buy.   So, you cannot invest in Fundsmith.

As a private company, can Fundsmith themselves go out of business? 

yes

 And if so, what happens to my investments within the fund at that point? 

Ahh, you are not actually talking about investing in Fundsmith but in a fund managed by Fundsmith.  That is a very different thing.

When you invest in unit linked funds, you are not investing in the fund house.  You are investing in the fund run by the fund house which in turn invests in the stockmarket or other trading areas.   The fund owns those assets. Not the fund house.

If the fund house was to fail, then either another would be sought to take it over (the most likely option as Fundsmith funds are not heavy on illiquid assets).  Ultimately, if that failed, the funds would be suspended and liquidated.   The liquid assets would be sold very quickly (within days to weeks).  The illiquid assets would take longer.   Potentially years.   However, as mentioned, Fundsmith are not heavy in those.

Moe_The_Bartender

Fundsmith have no illiquid assets whatsoever and estimate that they could liquidate their entire £26bn portfolio in no more than a week.