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Five funds taking on Fundsmith – and winning

·3-min read
Terry Smith
Terry Smith

Britain’s largest fund is also one of its most successful. Since its launch in 2010, Terry Smith’s £24bn Fundsmith Equity fund has made its investors 485pc, more than double the return of the global stock market.

But a number of smaller rivals are snapping at the heels of Fundsmith and can claim to have beaten the returns of their better-known peer over the past five years.

While Fundsmith Equity’s 141pc return over that period still comfortably beats the 103pc from the MSCI World index, a barometer for global stocks, 33 rival funds investing in the global stock market have performed better.

They include some highlighted by experts as strong picks for investors to hold alongside Fundsmith, offering differing approaches that can complement Mr Smith’s approach of holding a small number of large companies for the long term, with minimal trading.

Andrew Merricks of 8AM Global, the asset manager, said: “Although Fundsmith is exceptional, it is very dependent on a handful of shares continuing to do particularly well and as it is so huge, it has no real option but to invest in certain very large stocks.”

T Rowe Price Global Focused Growth Equity

This £3.7bn fund has delivered double the returns of the global stock market over the past five years, making investors’ 212pc.

James Calder of City Asset Management said while the fund’s name suggested a focus solely on growth companies, manager David Eiswert was “pragmatic enough” to also seek out cheaper “value” companies and not overpay for shares. This had helped to insulate the fund from losses as growth stocks have sold off this year on fears of a rise in inflation.

“When one looks at the holdings and the countries the fund invest in it has an obvious growth bias but it does not follow the pack. It is a fund for all seasons, almost,” he said.

ASI Global Smaller Companies

Unlike Mr Smith, who typically invests in the largest global companies, this £1.5bn fund focuses on smaller businesses that can grow to become household names.

Darius McDermott of Chelsea Financial, the fund shop, said: “The fund’s process is based on its powerful screening tool ‘Matrix’, which co-manager Harry Nimmo helped create, identifying smaller companies from all around the globe.”

Smaller firms tend to outperform larger companies over the long term and this system, which grades stocks according to multiple factors, has a proven track record.

Liontrust Sustainable Future Global Growth

This £1.4bn ethical fund has delivered a 154pc return for investors over the past five years by focusing on companies with sustainable businesses and strong management.

Mr McDermott said managers Simon Clements, Peter Michaelis and Chris Foster were seeking to profit from companies exploiting three “mega trends”: more efficient use of resources, improved health and an increased focus on safety.

They invest heavily in some of America’s biggest companies, such as Alphabet, owner of Google, and Charles Schwab, the broker.

Rathbone Global Opportunities

James Thomson, manager of the £3.5bn Rathbone Global Opportunities fund, employs a similar approach to Mr Smith and holds a number of the same stocks, like payments firm PayPal and Estée Lauder, the cosmetics company.

Rory Maguire of Fundhouse, the research firm, said: “He is a proven growth investor and someone with a long track record of discovering businesses that grow their earnings and revenue at higher rates than the average company.”

The fund has made investors 150pc over the past five years.

L&G Cyber Security Ucits ETF

A small number of passive exchange-traded funds, tracking the performance of specialised markets, have also delivered higher returns than Fundsmith Equity over the past five years, and were added to its Global fund sector last month.

Mr Merricks said this £1.9bn cyber security ETF was a strong choice, having returned 194pc over the past five years.

“Everyone needs more security online, and the market has to grow as online use increases. This ETF has done tremendously well” he said.