Terry Smith: ‘More than usually challenging’ 2023 hits stockpicker’s flagship fund
LEGENDARY City stockpicker Terry Smith’s flagship equity fund underperformed global stock markets last year but analysts said punters wouldn’t be too ‘miffed.’
The £24bn Fundsmith Equity Fund returned a total return of 12.4 per cent last year, shy of the 16.8 per cent MSCI World Index. However, the fund remains the best performer since its inception in a sector ranking of 165 funds maintained by the Investment Association.
In a typically punchy letter to shareholders, Smith said “outperforming the market was more than usually challenging in 2023” with the stellar showing from the Nasdaq’s so-called ‘magnificent seven’ skewing performance comparisons.
Losers in Smith’s fund included Estee Lauder – which Fundsmith sold this year after what Smith called its “mishandling” of China’s post-Covid reopening – and Diageo, which has been hit by a slowdown in sales in the Americas.
Smith used his letter to praise the late Sir Ivan Menezes, the longtime Diageo boss who passed away last year, as one of the “unsung heroes of the corporate world.”
High-performers included Meta, Microsoft and Novo Nordisk.
“Terry Smith has a loyal following and a great deal of credit in the bank due to his long-term track record,” Laith Khalaf, head of investment analysis at AJ Bell said.
“With assets of £24 billion in his flagship fund, Terry Smith isn’t likely to be too worried as plenty of investors are clearly still keeping the faith.
“All active managers are of course prone to periods of underperformance, especially those like Fundsmith which have a distinct investment style and run a concentrated portfolio. This is especially true when market leadership is as narrow as it was in 2023.”