为什么投资者对Fundsmith趋之若鹜（《这是金钱》）

Star manager Terry Smith operates Fundsmith Equity from Mauritius, after relocating last year

Fundsmith has developed a considerable fan club of investors and it is not difficult to see why.

The Fundsmith Equity fund, run by city veteran Terry Smith, topped the bestseller lists of both the Bestinvest and AJ Bell DIY investment platforms last year and has returned a whopping 266 per cent in a little over seven years since it was launched.

In other words, a £1,000 investment would have turned into £3,663 over the period (to 15 January 2017).

The average rival fund would have turned the same amount into just £2,061 over the same period.

The fund is headed by Smith, one of Britain's most high profile investors, who unafraid to put his money where his mouth is, staked £25million of his own cash when Fundsmith launched - and another £115million in 2016.

The idea was to deliver a fund that offered a clearly defined and simple investment philosophy, investing in companies around the world that had the power to turn cash into consistent profits.

Smith's long-term investors have been cheered by that approach and he is likely to have made over £30million in notional profits from his investment in the past year alone.

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Buffett-style investment philosophy

So what does Fundsmith do? The fund scours the globe for the best stocks for long-term growth and a combination of its popularity and successful investing has seen it grow to a huge £13.7billion.

When it comes to selecting shares, Smith adopts a Warren Buffett-esque investment approach of buying and holding a small number of quality companies that can withstand the test of time.

He says that he also aims to keep costs to a minimum by trading only when it is absolutely essential. This is highlighted by the very small gap between its ongoing charges figure of 1.05 per cent and its actual cost of ownership including transaction costs of 1.10 per cent.

One of the key things that Smith uses to evaluate such companies is a measure called return on capital employed, or ROCE, which looks at a company's profitability compared to how much capital is invested in the business.

This is measured by profits divided by a company's net assets. A high double-digit figure usually signals that a company has a competitive advantage over its rivals, as it can make more money from putting the same amount to work.

For those who want to understand more, Fundsmith takes the unusual approach of publishing an Owner's Manual. Its website lists its criteria for companies as:

high quality businesses that can sustain a high return on operating capital employed businesses whose advantages are difficult to replicate businesses which do not require significant leverage to generate returns businesses with a high degree of certainty of growth from reinvestment of their cash flows at high rates of return businesses that are resilient to change, particularly technological innovation businesses whose valuation is considered by the Company to be attractive

This translates to a concentrated portfolio of 28 stocks with household name brands such as PayPal, Microsoft and Dr Pepper Snapple featured on the the fund's list of top 10 holdings.

Fundsmith's top ten holdings (Dec 2017)

Paypal

Amadeus

Microsoft

Novo Nordisk

Dr Pepper Snapple

Waters

CR Bard

Intercontinental Hotels

Stryker

Philip Morris

The latter of the three shares epitomises Smith's investment philosophy.

The Dr Pepper Snapple drinks giant has become a staple of the top ten holdings since the fund's inception and its share price has grown from $35.44 in 7 Jan 2011 to $95.90 on 17 January 2017.

Its share price has managed to maintain an upward trend throughout a turbulent time for some in the consumer products sector during the period.

In search of the best stocks, Smith and his researchers are reported to trawl through a plethora of research notes, annual reports and industry publications - from Tissue World magazine to the Petfood Forum - to uncover every last detail about a company.

This investment approach appears to have paid dividends.

The fund has returned 21.7 per cent, 78.22 per cent and 172.28 per cent over one-year, three-year and five-year investment horizons respectively - easily outstripping the performance of the benchmark MSCI World index, at 11.47 per cent, 52.85 per cent and 105.55 per cent, respectively.

The performance of Fundsmith Equity since its inception versus the MSCI World benchmark

The fund levies ongoing charges of 1.05 per cent, which may seem high - even for an actively managed fund - however, as noted above the charges are very close to the actual cost of ownership including transactions, which is not the case for many funds.

Many investors also say that they are happy to pay that little bit more for outperformance.

'He (Smith) has certainly developed a considerable fan club of investors who like his no nonsense buy-and-hold approach and the fact that he doesn’t sit on the fence with his views,' Jason Hollands, managing director of Bestinvest, said.

'Earlier in 2017, some were calling time on the types of “quality growth” companies that Smith backs, anticipating a resurgence instead for the fortunes of value stocks and cyclical businesses on the back of the “reflation” of the global economy.

'But the year turned out to be another strong one for managers with a quality growth style bias and this has been yet another period of top decile performance for the FundSmith Equity fund.'

Rock group Kiss rang the closing bell of the New York Stock Exchange back in 2010 in conjunction with the 125th anniversary of the Dr. Pepper soft drink. Parent company Dr Pepper Snapple has become a staple of Fundsmith's top ten holdings since its inception

The man behind Fundsmith

Smith, probably the best known fund manager in the UK alongside Neil Woodford, has long been somewhat of an investment maverick.

In the eighties, he famously told investors to sell their shares in Barclays when working for the investment bank arm of the bank called BZW.

Smith later became head of research at UBS Phillips & Drew but was sacked from the role in 1992 when he refused to withdraw a book he wrote that questioned the accounting practice of some of the bank's own clients.

He has also been a vocal critic of the mainstream investment industry for excessive fees and frequent buying and selling of shares to give investors a decent level of returns.

At the launch of his fund, in November 2010, Smith promised that it would be the 'best fund ever' and would give Britain's 'fat and complacent' fund management industry a bloody nose.

Darius McDermott, managing director of online fund ratings company Fund Calibre, said: 'He's very opinionated, which makes him a columnist's dream and results in him having a high profile.

He has a very clear investment process and backs his convictions - he's talked a good game but importantly has delivered

Darius McDermott, Fund Calibre

'He has a very clear investment process and backs his convictions - he's talked a good game but importantly has delivered.'

In 2014, Smith followed up the Fundsmith Equity fund with an emerging markets investment trust, Fundsmith Emerging Equity Trust, of FEET.

In recent years, Smith has become a bit more reclusive after abandoning his blog, which had provided a platform for his colourful views.

Last year, Smith fled from the hustle and bustle of City life to Mauritius because it is more convenient in terms of its timezone than London for dealing in Asian markets and for some peace and quiet to help him make investment decisions.

He follows in the the footsteps of investing stalwarts who prefer to be away from financial hubs, including Warren Buffett, who runs his Berkshire Hathaway business in Omaha, Nebraska; and the late Sir John Templeton who liked to run his funds from the Bahamas.

Fundsmith is heavily weighted towards the US market but also holds a big chunk in the UK

Will Fundsmith's outperformance last?

Fundsmith's performance has been buoyed by some strong tailwinds - most notably the growth in the US stock market and the success of large cap quality shares.

It has been able to capture a big chunk of that as almost 62 per cent of the fund is invested in US equities. Returns have been bolstered by the fall in the pound's value.

But those gains have been achieved through a long bull market that has seen the US stock market chased up to high levels of valuation.

Investors must ask themselves, will the outperformance continue if the US market hits bumpy times?

Ben Yearsley, director at Shore Financial Planning, said the US is not only a big portion of the fund but of global stock markets also - it makes up 60 per cent of the MSCI World index.

The good thing about buying long-term winners is it is quite likely that those companies will still be around and growing in 10 or even 20 years' time

Ben Yearsley, Shore Financial Planning

'If the US markets catch a cold most markets will,' Yearsley said.

'The good thing about buying long-term winners is it is quite likely that those companies will still be around and growing in 10 or even 20 years' time. Therefore the problem with buying them is more about timing and price.

'Which leads me to the problem with the fund. It is packed with excellent long-term companies but you are being made to pay a high price for them currently.

'When you have scarce global growth, companies growing at even 2 per cent each year consistently are in demand.'

Ultimately, Fundsmith's approach in buying and holding such companies long-term reflects that of Buffett and another very successful UK fund manager dubbed Buffett-esque, Nick Train, who runs Finsbury Growth & Income and the Lindsell Train UK Equity and Global Equity funds (the latter with Michael Lindsell).

All three have emerged from the school of value investing, but have no problem in holding companies that trade at relatively high price-to-earnings ratios compared to the market average. Their argument is that there is a limited number of great businesses in the world and although sometimes you have to pay a higher price for them that may still be a good deal.

Like Train's investment trust and funds, Fundsmith has now built up a healthy track record of returns for investors.

Of course, when choosing an investment past performance is only one part of the equation. The calibre of those who have been given the reins to manage the fund should be a major factor in your decision. For now, investors seem to think Terry Smith passes that test.