Fundsmith

Aged

I need to boost the 'equities' part of my portfolio to get the balance to what I'd like it to be, and I've been thinking for a while about Fundsmith Equity. It seems a highly regarded and successful fund, although the OCF is perhaps a bit higher than I'd like it to be. Would now be a good time to take the plunge? Would appreciate hearing some constructive opinions. No sarky remarks please, I'm simply trying to learn here 

eskbanker

Aged said:

I need to boost the 'equities' part of my portfolio to get the balance to what I'd like it to be

What is currently in your portfolio and what do you want it to look like, in terms of strategy, objectives, timescales, risk tolerance, etc?  In other words, what leads you to the conclusion that there's a Fundsmith size/shape hole?

Aged

eskbanker said:

Aged said:

I need to boost the 'equities' part of my portfolio to get the balance to what I'd like it to be

What is currently in your portfolio and what do you want it to look like, in terms of strategy, objectives, timescales, risk tolerance, etc?  In other words, what leads you to the conclusion that there's a Fundsmith size/shape hole?

I have ten funds in my portfolio, including a UK Equity Income fund, a UK All Companies fund as well as a global (FTSE developed world ex-UK) tracker fund. That gives me just over 40% in equities, but I want to be at least at 50/50 equities/bonds. My official retirement date is in 3 years, and I then hope to go into drawdown. I think I need a GOOD global equity fund to fill the hole and generate some extra income to get me to where I need to be at that point. I hope that makes sense?

dunstonh

I think I need a GOOD global equity fund to fill the hole and generate some extra income to get me to where I need to be at that point. I hope that makes sense?

Are you using natural yield or total return to fund your income?
are you looking to position your portfolio to the method you are using in three years' time now or are you going to change it at that point?

Aged

dunstonh said:

I think I need a GOOD global equity fund to fill the hole and generate some extra income to get me to where I need to be at that point. I hope that makes sense?

Are you using natural yield or total return to fund your income?
are you looking to position your portfolio to the method you are using in three years' time now or are you going to change it at that point?

I intend to rely on total return. I don't plan to change things drastically in 3 years time, but I will constantly monitor to check that things stay on track.

Audaxer

Aged said:

eskbanker said:

Aged said:

I need to boost the 'equities' part of my portfolio to get the balance to what I'd like it to be

What is currently in your portfolio and what do you want it to look like, in terms of strategy, objectives, timescales, risk tolerance, etc?  In other words, what leads you to the conclusion that there's a Fundsmith size/shape hole?

I have ten funds in my portfolio, including a UK Equity Income fund, a UK All Companies fund as well as a global (FTSE developed world ex-UK) tracker fund. That gives me just over 40% in equities, but I want to be at least at 50/50 equities/bonds. My official retirement date is in 3 years, and I then hope to go into drawdown. I think I need a GOOD global equity fund to fill the hole and generate some extra income to get me to where I need to be at that point. I hope that makes sense?

You could just add to the FTSE developed world ex-UK tracker fund to give you 50% equities. Although Fundsmith has a good record of returns, that doesn't guarantee it will boost your portfolio in the next 3 years more than adding to the global tracker would. 

Prism

Its my favourite fund, and largest holding. So far it has never disappointed and does pretty much what it says on the tin. Its actually quite defensive for a global equity fund and tends to fall less during a typical crash. I wouldn't however expect it to do as well as in the past during this time of rising interest rates and commodity prices. The holdings do have decent pricing power which should help them keep up with inflation but the share price may well not.

tebbins

Unless you think it would take your home bias higher than you're comfortable with, my personal favourite is the FTSE 250. Fundsmith is a decent fund as funds go, but I'm not happy with them not lowering the OCF with size, and the stellar returns since launch make me doubt they'll be able to beat a global tracker over the next decade or so. I think they would struggle to ever be a "dog" fund though or go the way of Woodford - the portfolio is fairly diverse, all good companies (you can tell them apart because they don't need to advertise), not stupidly concentrated, liquid, and doesn't hold anything stupid like biotech venture capital.

aroominyork

Fundsmith and Lindsell Train used to be mentioned in the same breath, but over the last three years LT has had a torrid run while Fundsmith had continued to perform reasonably well. While I have long been wary of LT because of its overriding focus on consumer brands, it invests in companies with similar business models as Fundsmith so I think Fundsmith fans (of which I count myself one) should be aware the fund could head south. About 15% of my equity holdings are in Fundsmith (the Sustainable fund, to avoid Philip Morris) which is my second highest active fund, but I think about trimming it back a bit.

Rollinghome

Aged said:

I need to boost the 'equities' part of my portfolio to get the balance to what I'd like it to be, and I've been thinking for a while about Fundsmith Equity. It seems a highly regarded and successful fund, although the OCF is perhaps a bit higher than I'd like it to be.

 Try not to pay for past performance.  It's for you to decide whether that would apply to Fundsmith.

It's done very well in the past, but less well more recently.  Over the last 3 years it has returned 40.49%, against 48.54% from your global ex-UK tracker, and 42.48% against the Vanguard FTSE All World ETF.

So will out-performance return to justify those high fees?  Maybe, but it's now a very big fund which will restrict it to investing in bigger companies, and the style that once did so well for Lindsell Train and Fundmith is currently out of favour. 

Its OCF is seven times that of your global tracker - so Smiffy's special sauce will need to be very special to overcome the extra weight it's carrying, especially if equity returns are lower going forward as many expect. How does it fit with your other holdings? Your money, your decision.

Cumulative performance, total return.
                                                                               3 months     6 months     1 year     3 years     5 years
Vanguard FTSE Developed World ex-UK Index Acc      -1.11%    3.9%       10.19%    48.54%    71.68%
Fundsmith Equity I Acc                                                   -5.94%    -2.62%    6.05%    40.49%    89.32%
Vanguard FTSE All World ETF                                       -0.69%    3.43%    8.8%      42.48%    62.79%

bostonerimus

Aged said:

dunstonh said:

I think I need a GOOD global equity fund to fill the hole and generate some extra income to get me to where I need to be at that point. I hope that makes sense?

Are you using natural yield or total return to fund your income?
are you looking to position your portfolio to the method you are using in three years' time now or are you going to change it at that point?

I intend to rely on total return. I don't plan to change things drastically in 3 years time, but I will constantly monitor to check that things stay on track.

What's wrong with your current funds? Why not just increase your allocation to equities within your existing portfolio. Fundsmith is no magic bullet. 

Have you thought about your drawdown strategy and your retirement budget? Do you intend to use an index linked "Safe Withdrawal Rate" or one of the more adjustable drawdown approaches?

You said you have a 10 fund portfolio, maybe think about reducing the number of funds you own prior to retirement to make drawdown simpler. Look for overlap between funds. Even if you do nothing this will allow you to re-evaluate before you retire.