Fundsmith Equity Fund

All. looking at Fundsmith again as they continue to outperform- however currency risk is a worry as could wipe out profits. and this AndyWahol guy gives a example on ef thread . .

https://www.englishforum.ch/finance-banking-taxation/269891-question-regarding-fundsmith-7.html

what do you think. is valid concern?

It’s a global equity fund… You eventually hold stocks from all over the world which have nothing to do with the British pound. If the pound really lost value, the value of the fund would just rise by an equal amount.

E.g. imagine if the fund just bought physical gold. Would it matter what currency they used to buy it?

Ok interesting I see. . So this is only really a problem if you investing 100% with local companies in one country & currency and then change to other currency?

Eg. . 100% UK small cap in gbp- then later change to chf. Bad exchange rate could impact here?

Although this article says otherwise . .
https://www.am.pictet/en/globalwebsite/global-articles/2018/educational/demystifying-currency-hedging

Do note that the Pictet article pertains to fixed income (most notably bonds) These instruments, as their name implies, promise you future payments that are fixed - in amount and currency.

Example: You buy a bond (or a fund of bonds) with a 10% yearly yield in USD? It might straightforwardly pay out 10% interest a year. Assume the USD loses 10% against the CHF in the meantime? Even though you‘ll eventually receive your 10% interest payout, you make a return of -1% (1.1 x 0.9) when calculated in CHF. And then, to make things even worse, you’ll still be on the hook to pay income tax on the 10% income at the applicable exchange rate.

This a pretty straightforward scenario - and one where you might want to currency hedge your investment (though, obviously, if you do not and the USD gained 10% against the CHF, you‘d would receive the 10% interest and then benefit from another 10% gain in the exchange change on top of that).

For equity though, the situation is different. With internationally operating companies, many of the effects of changes in currency rates will even out or considerably smooth out.

(Just to add)

Most probably not by an 1:1 „equal“ amount. In practice, there will certainly be a currency effect and risk. Though that would be very complex if not impossible to accurately predict. „How local or international are companies? What costs are in domestic currency, what are in foreign currency, how do changes in exchange rates affect sales in different markets?“, etc. etc… Over the long term, it‘s probably not worth to worry too much about (especially with regards to globally diversified equity funds investing in developed economies).

Thank you very much for taking the time to explain this :+1:t2:

Maybe also good practice to keep eye on the rates each quarter. History is interesting- gbp/chf swings a fair bit if you view 10yrs data and select monthly view up to 22% . .

1.13 lowest, 1.81 highest

Same with any other international investment, including buying Vanguard ETFs on IB, which are in USD…

I guess I’ll use this existing thread, because it didn’t get the right traction first time around.

Can anyone share their feelings about Fundsmith?

Their principles make a lot of sense from a Mustachian point of view.

And their return has been amazing, 19% annual growth in GBP, in comparison to 16.4% of iShares S&P500 Acc (also GBP, ticker CSP1, could not find comparison in another currency) in the 9 years since inception.

If you invested GBP 100’000 with them in November 2010, you would now have 460’000, compared to 378’000 with S&P 500.

Index based ETFs give me the comfort of not having to trust a group of people. But the success of Fundsmith is hard to ignore, so I would like you to tell me why it’s better to stick with ETFs :slight_smile: .

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I have also been looking into Fundsmith. It looks the fund has been doing well recently due to its positions in MSFT and PYPL which are doing pretty well. I find the expense ratio to be bit high for my liking.

Share Class OCF* Minimum Price
T Class Acc 1.19% €2,000 40.68
T Class Inc 1.19% €2,000 38.48
R Class Acc 1.69% €2,000 39.27
R Class Inc 1.69% €2,000 38.54
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Terry Smith is explaining his philosophy here. Crystal-clear, and so far he has not deviated from it.
I am keeping an eye as well on him.

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I’ve invested 20k euros in February 2016. Those 20k were my first investment ever :slight_smile: I debated putting up to 80k (all I had at the time) but decided to be cautious…

It is worth about 35k now. I would advise looking at the returns in euros and not in pounds. Overall, I’m very satisfied (I mean, who wouldn’t?) but it’s not like it killed the S&P500 in my case. I do feel better about owning it though. I feel that when the market turns at some point, Fundsmith might significantly outperform the market (by decreasing less). I also own some of their emerging market fund (FEET) and small and mid cap fund (SSON) with much less stellar results.

I didn’t invest more with them because I figured that I could just replicate their holdings and save myself the 1% fee. Turns out that it’s less straightforward than I thought… But it got me interested in the stock market. In the end, I sold most of the individual stocks of the fund and bought BRK.B and a few others instead…

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Hi Guys also looking into Fundsmith, I couldn’t find the fund in Interactive Brokers. Is it possible to use IB to invest in this fund? (I could find their Emerging Equities fund - FEET)
thanks

The way I understand it (never invested myself):

Fundsmith is not available as an ETF, only as mutual fund. That means that you open up an account at Fundsmith, then they give you a bank account and you send them the money (GBP !!! so exchange your CHF/EUR/USD beforehand). Since it does not trade on any exchange market, there is no bid/ask price, only the NAV published by Fundsmith. You cannot trade with other people, only with Fundsmith.

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Exactly. The main fund is a mutual fund, i.e something not traded on an exchange.
On the other hand, their two smaller products, FEET and SSON, are setup as Investment Trust public companies, which are publicly listed on the London Stock Exchange.

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It is possible to invest in EUR (e.g. Fundsmith Equity Fund Sicav T EUR Acc). Once you open the account with them (the forms are available on their website / global section), you can send them the buy/sell orders by post or fax. No online account for non-british customers available, the monthly reports are sent by post. The minimal amount to invest is à 2000 EUR.

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