Fundsmith again.

aroominyork

Do it this week and report back, OP. We're all rooting for you!

aroominyork

Terry Smith's half-yearly letter describes a change in approach to more active trading. "…our portfolio turnover hit a high of 51% in the first half of this year…". Here is Monevator's take (subscription required).

If I hadn't sold out a year ago I would head for the exit now, since the letter reads like Fundsmith has little idea how to react to the - at least temporary - new reality.

Fundsmith now lags Fidelity Index World (a developed world fund, since Fundsmith holds no emerging markets) since launch.

talexuser

Definitely living on past reputation now to those who don't look at the figures. I did wonder about the new turnover compared to the "British Buffet" quality buy and hold you are supposed to be in. It may depend on how soon we get a major crash and how he comes out of it the other side?

It did very well for Woodford in Perpetual High Income staying out of banks before the 2007 crash and shunning tech before the dotcom crash, coming out as a great performer afterward. But I think Woodford's underperformance beforehand each was not as bad or as longlasting than Smiths from distant memory. And then of course it went to his head he was invulnerable.

I really can't see Fundsmith being worthwhile unless we have a 50% crash and his companies just happen to weather the storm faster han most others.

dcs34

Yes I found the letter to be hardly reassuring which is odd given that must have been the tone they were aiming for. Quite a few stocks they seemed to back 24 months ago now marching back down the hill from.

Woodford's situation benefited from the fact his good performance came after earlier bad performance; so looked better coming from a relative weaker position, and the earlier years could be ignored. Meanwhile Fundsmith's early years during Brexit and pre-Covid were some of the strongest years and their performance post-Covid seems to be lingering behind the comparators with differing rationales mostly aligning to "wait and see". People joining the fund more recently aren't experiencing anything like the "since inception" track record suggests.

His points about active v passive funds and the way company valuations are now oscillating significant % each day are both valid. But he seems to be sliding (reluctantly) towards a "if you can't beat them, join them" response - well in that case why would I keep paying him the management fee if he's just going to move towards an index tracker?

masonic

One important aspect of the role of a fund manager is to make more informed decisions than your investors would make for themselves. One can argue the merits of this style of investing, but when you start taking your lead from your investors, why are you being paid at all?

aroominyork

A standard part of the annual shareholders' meeting was Terry addressing the >0.9% fee by saying (and I paraphrase) that value is measured by what you get, not what you pay. I wonder if he is now sending out refunds?

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/82066802#Comment_82066802

But did you sell?

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82067135#Comment_82067135

When it comes to fees paid to active fund managers vs index funds, I like John Bogle's pithy comment that "you get what you don't pay for". It's too glib, but it does get at a certain truth.

aroominyork

Great quote (doesn't seem glib to me). It goes with his "Don't do something, just stand there.".

Linton

The view I take of active funds like Fundsmith is that they implement a particular strategy. If the strategy is a useful addition to one's overall portfolio diversification and objectives they could be worth buying. No one, in particular fund managers, can predict the future of the markets and it would be unreasonable to expect them to be able to. Sometimes the strategy will perform extremely well, sometimes it wont. It is nothing to do with the fund manager's skills,nor to funds going "off the boil".

In that light Fundsmith was a great fund with a consistent investment policy and, if I had been holding it, recent poor performance would not be a reason to sell. However I dont see how extra trading could be beneficial. Such a change in policy could lead me to look elsewhere.