Fundsmith

[Dod101]

OK. Just a thought. I do not see why it could not be replicated but am perfectly prepared to be shot down. It could never be an exact copy but I have not actually looked at the holdings of Fundsmith because I would never buy it with its charges anyway.

Dod

[scrumpyjack]

I wonder whether it would be legal for Vanguard, say, to do a 'Fundsmith' tracker? ie an ETF that aims to track the holdings in Fundsmith (OK with some tracking error) and maybe a charge of 0.1%pa? That would be a laugh!

[simoan]

OK. Just a thought. I do not see why it could not be replicated but am perfectly prepared to be shot down. It could never be an exact copy but I have not actually looked at the holdings of Fundsmith because I would never buy it with its charges anyway.

Dod

But it's nothing to do with it being Fundsmith. The same applies to any Global fund with a decent fund manager who is not trying to keep his job by secretly hugging an index. There are plenty of those around, and as Terry Smith makes clear every year the total charges i.e. including dealing charges of these funds is in reality much higher than advertised.

All the best, Si

[Backache]

When Fundsmith started , it's charges were pretty low for an active fund. It also pointed to the fact that it had very few other costs of ownership. It is still the case that if you hold the fund with Fundsmith in an ISA you don't pay anything extra for that whereas even with low cost providers there is usually a custodial charge of sorts.
Interestingly I recall when interviewed fairly early in the history of Fundsmith Smith saying that at that point of time charges barely covered costs and wouldn't till it had grown larger but he would consider reducing costs as the fund increases in size.
Whenever I have heard him recently he has basically said you get what you pay for and look at the returns , but the costs outside management charges remain low.

[nmdhqbc]

It is still the case that if you hold the fund with Fundsmith in an ISA you don't pay anything extra for that whereas even with low cost providers there is usually a custodial charge of sorts.

Holding directly with Fundsmith you get the T class units with OCF of 1.05%, with iWeb for instance you get the I class units which charge 0.95%. So in effect there's a charge of 0.1%. Not bad but cheaper with iWeb for a lot of folks depending on number of transactions you make and the value.

[fca2019]

I'm one of the many paying towards Terry Smith's luxury home on his island paradise in Mauritius, but as long as the fund is continuing to beat the market, I am more than happy to do so. I guess he is one of the very few fund managers to have consistently beaten the market over a 10 year period.

[Aminatidi]

OK. Just a thought. I do not see why it could not be replicated but am perfectly prepared to be shot down. It could never be an exact copy but I have not actually looked at the holdings of Fundsmith because I would never buy it with its charges anyway.

Dod

By that reasoning you could replicate anything.

And to some degree you're right.

But a question if you do.

Let's say you track down the entire Fundsmith holdings but not the allocations as I don't believe they publish those especially outside of the top 10.

Do you think that armed with that information you could run the portfolio to within 0.95% of what Fundsmith have done to date?

There are certain things in investing that I really can't get my head around and one is people being concerned about losing all their money "because of Tesla" if they put it into SMT and another is people who don't like what Terry Smith charges when it's maybe 0.2% more than comparable funds (and less than some others) and he certainly doesn't force anybody to buy what he's selling

[Dod101]

By that reasoning you could replicate anything.

And to some degree you're right.

But a question if you do.

Let's say you track down the entire Fundsmith holdings but not the allocations as I don't believe they publish those especially outside of the top 10.

Do you think that armed with that information you could run the portfolio to within 0.95% of what Fundsmith have done to date?

There are certain things in investing that I really can't get my head around and one is people being concerned about losing all their money "because of Tesla" if they put it into SMT and another is people who don't like what Terry Smith charges when it's maybe 0.2% more than comparable funds (and less than some others) and he certainly doesn't force anybody to buy what he's selling

You have illustrated another of the weaknesses of an OEIC against an IT. OEICs do not always publish all of their holdings for some reason.

I hold SMT, Tesla and all, because of course I am buying the house of Baillie Gifford and the management skills of Messrs Anderson and Slater. I am not going to try second guessing them. In fact I seldom look at what the holdings actually are. I have held it for maybe 20 years or so and it has done well for me.

I am not sure I like Terry Smith's preaching although it has to be said he has done very well for investors. I do not hold Fundsmith because I cannot accept the charges on principle. I hold Smithson and the charges there are not much different to Fundsmith but it is of course a very much smaller fund.

To answer your question no I do not think I could run a replica of Fundsmith for all the reasons discussed in the thread but it is quite an interesting discussion and it should be possible for someone to do it if they have all the underlying information and the computer programming skills. It would after all be an index fund, the index in this case being the Fundsmith holdings.

Dod

[SalvorHardin]

Warren Buffett has said that when he worked for Benjamin Graham at Graham-Newman, some people did copy their portfolio as best as possible. It was a low turnover concentrated portfolio, so it was relatively easy to mimic.

They were not clients and they relied on the published information. One of them even used to regularly thank Mr. Graham (who IIRC wasn't bothered about it).

Some people will be trying to copy Fundsmith, given its track record.

Finsbury Growth & Income is another that can be closely matched because of its low turnover and having roughly 20 holdings. Quite a bit of my portfolio resembles it (and Finsbury G&I is my largest investment trust holding).

[flyer61]

Interestingly I have tried to replicate Fundsmith in my SIPP. To difficult!! Apart from Nestle and Stag REIT my top ten individual equity holdings are all FS or Smithson (Christian Hansen). I hold FS as a standalone investment outside of SIPP/ISA. Nearly fell of my chair when I read in the IC that Stag was one of a number of Companies that everyone should own. Purchased 3 years ago.

For me it is simple. Investors invest in Companies....if I can I don't want s&^% Companies in my portfolio. With Terry's methodology there is a very good chance I will achieve my aim.

He recently said 'I don't know the future'...a statement of the bleeding obvious however we need reminding of it and I for one want to be riding decent Companies with low debt, high returns on Capital that is repeatable with moats into the great blue yonder.

It has taken me 35 years to get my head set straight and I am grateful to Terry and FS for the education.

[jaizan]

The Fundsmith Emerging Equity Trust (FEET) is about middle of the pack for 5 year returns in the global emerging markets sector.
As with any investment strategy, it's far from certain that Terry Smith's strategies will always outperform.

[colboy]

HL not including Fundsmith in their latest list of recommended funds. I like the response -
'Fundsmith Equity manager Terry Smith hit back at Hargreaves, telling The Times: ‘Given the poor track record of Hargreaves’ Lansdown’s best buy lists and the fate of some other funds they have recommended, we would worry if we were included.’'

[scotia]

HL not including Fundsmith in their latest list of recommended funds. I like the response -
'Fundsmith Equity manager Terry Smith hit back at Hargreaves, telling The Times: ‘Given the poor track record of Hargreaves’ Lansdown’s best buy lists and the fate of some other funds they have recommended, we would worry if we were included.’'

Yeah, just the latest spat in a long running feud. Though, I think it can be said that the various reasons HL gave over the years for not including FS in their best buy lists really doesn't stand up to scrutiny. In truth, it's going to be all about Smith not cutting deals with HL on charges. Smith said so on more than one occaision. But of course HL cannot ever say such a thing.

RVF.

I find it surprising that Terry Smith feels the need to make sarcastic comments about Hargreaves Lansdown. Looking at its size and performance, Fundsmith seems to be prospering, and I suspect a lot of the smaller investors (including myself) actually buy Fundsmith via Hargreaves Lansdown. So its not on HL's recommended list - whatever their reason may be. So what?

[simoan]

HL not including Fundsmith in their latest list of recommended funds. I like the response -
'Fundsmith Equity manager Terry Smith hit back at Hargreaves, telling The Times: ‘Given the poor track record of Hargreaves’ Lansdown’s best buy lists and the fate of some other funds they have recommended, we would worry if we were included.’'

Yeah, just the latest spat in a long running feud. Though, I think it can be said that the various reasons HL gave over the years for not including FS in their best buy lists really doesn't stand up to scrutiny. In truth, it's going to be all about Smith not cutting deals with HL on charges. Smith said so on more than one occaision. But of course HL cannot ever say such a thing.

RVF.

I find it surprising that Terry Smith feels the need to make sarcastic comments about Hargreaves Lansdown.

It's pretty clear that Terry Smith loves investing in companies with high returns on capital, high operating margins and very good conversion of earnings into free cashflow - just like Hargreaves Lansdown, in fact. He just doesn't like it when he's on the other side of those margins. IMHO it's double standards.

All the best, Si

[flyer61]

https://www.fundsmith.co.uk/news/articl ... -investors

[scrumpyjack]

I, like others here, never buy funds and wouldn't buy FS as I'm naturally mean and object to high charges. But I'm happy to use HL. Their charges are very reasonable as I don't touch funds and their customer service is the best of the many brokers I have used over the decades.

SMT has done very very well for me and their charges are a lot lower than FS - getting a bit overweight though (now over 14% of my holdings), but I always let the winners run unless there is a very good reason not to.

[simoan]

https://www.fundsmith.co.uk/news/article/2020/07/02/financial-times---there-are-only-two-types-of-investors

Whilst what he says is correct about market timing, he's really using a straw man to argue with here - I don't believe the vast majority of financial advisors will have been telling their customers to sell equities. Far from it, in fact.

I don't know why he feels the need to write these articles, perhaps he is contractually obliged to do so. If so, come on, change the record Terry.

All the best, Si

[simoan]

I find it surprising that Terry Smith feels the need to make sarcastic comments about Hargreaves Lansdown.

It's pretty clear that Terry Smith loves investing in companies with high returns on capital, high operating margins and very good conversion of earnings into free cashflow - just like Hargreaves Lansdown, in fact. He just doesn't like it when he's on the other side of those margins. IMHO it's double standards.

All the best, Si

I would just like to point out it's far from one sided. HL want everyone to reduce their fees, but not them.

I thought this was what I was saying? Having a dominant platform with high margins that make suppliers squeak to gain access is just the type of business that Fundsmith normally invest in. There are many examples of this, take for instance the Smithson holding in Rightmove. Another would be Facebook and their current stand-off with advertisers - Zuckerberg knows he can afford to be so arrogant he has the nerve to tell large multinational ad placers "you'll be back". If Terry Smith doesn't like being told to reduce his own margins, that's fine, but it's total double standards to keep complaining out loud about it when that is the very essence of the moat type businesses he invests his funds in. I should also note that Nick Train holds Hargreaves Lansdown.

As far as mainstream retail platforms go, they have an excellent offering. But it's by far the most expensive as a rule. There are exceptions if you don't use any funds, for example. HL often say how expensive funds can be and how it damages your returns. Yet they never, ever, talk about their own usurious fees. Naturally, nobody is forced buy Funsdsmith just like nobody is forced to use HL. I am very happy with the former, FS adds value. HL I will never use, they can only remove value from me. I get the same thing from II for a fraction of the cost.

It's horses for courses. With HL you can have a dealing account and ISA for only £45 per year, if you don't hold funds, which I don't. That's cheaper than many other brokers. And for that you get the best customer support I've experienced from any broker. Similarly, their SIPP is actually cheaper than the much vaunted Vanguard SIPP for large pots if you just want to hold ETFs. You pays your money...

Si