Fundsmith Equity Fund

These look interesting alternatives! However 2015/2016 they don’t seem to perform too well, otherwise quite interesting

Sure, the Sterling decreased in value over 10 years (most of it coming from the Brexit).
But 10 years ago, the dollar and the euro were as well much stronger against the Swiss franc (in April 2010, 1 EUR = 1.47 CHF and 1 USD = 1.17 CHF). So for the Swiss investor, it is more an issue of having your domestic strongly strengthening against every other currency over the last 10 years.

I agree that if you plan to stay and retire in Switzerland, this is not optimal. However, if you are accumulating in Switzerland and plan to retire elsewhere, then it is very good. Profit from your CHF having increased value so you can buy more, and then retire in EU with Fundsmith strongly performing in EUR denominated terms…

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I agree with the first bit, that you earn substantially more in CH since 10 years ago in EUR, GBP or USD terms, but you can retire in EU with VT in USD or VWRL in CHF or even a World ETF in Zimbabwe Dollars & the outcome/performance for you in EUR will be identical in EUR.
The way you write it doesn’t help (other people) to understand the currency of a fund is irrelevant IMO.
And I doubt fundsmith outperforms when you compare it to the correct passive growth ETF.

Ok so let’s compare apples to apples, and convert everything to USD, since both passive indices are in USD.

The factsheet of these indices can be found here and here

Over the last 10 years, since Fundsmith inception:

  • Fundsmith performed 16.7% per year, in GBP and after fees (the fund was opened in 2010)
  • the GBP/USD pair went from 1.52 in March 2010 to 1.24 in March 2020
  • the gross performance of the MSCI world momentum index is 11.44% per year (gross, before the TER of your ETF), in USD
  • the gross performance of the MSCI World Quality index is 10.61% per year, gross, in USD
  • MSCI World Index (Fundsmith’s benchmark) performed 6.57% per year in USD

Now let’s figure out how much Fundsmith would have performed in USD, after fees.
Over ten years, the total performance would be (1+16.7%)^10 * 1.24/1.52 = 3.82, so +282% performance.

To translate it in annual performance, we take the 10th root of 3.82, which gives 1.143. So the annual performance of Fundsmith, in USD and after 1% management fees is 14.3% per year.

It has beaten its benchmark (MSCI world index, comparable to VT) by 7.8% per year, and it beats the two growth indices by between 3% and 4% per year.

I am happy to correct it if i made a mistake.
But by now i hope my writings are not confusing anyone anymore.

As to whether it will continue to outperform, everyone has his own idea. I’ll let you do your own diligence on the matter.

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Impressive comparison (thanks) and impressive (out-)performance.
It may be “hidden” in the terms used “gross” etc, but I’m not 100% in my understanding of these terms, so just to confirm these performances all include dividends (which may have be paid out or accumulated). As long as it’s included in some way in all performances that’s fine for comparison.

quite timely to todays discussions the asm has just been uploaded

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Hello,

I have the fund with Swissquote and I also have an account in the SICAV Lux. The fund in my opinion, is excellent, not only for the return but also for the investing process.I have it since 2 years approx, the main question for me was always how will it do once there is a massive drop in the market… well, now we know, better than S&P 500.
Swissquote has it as Tier B, which means you pay 0.5% per transaction ranging 50chf min and 250chf max. It is not cheap, but it is very convenient. That fee is one time (two if you add when selling) and will in any case be lower than an average fund of 1.5%.

Opening the Sicav was fine, many papers to fill but not complex at all, then a certified copy of passport (SBB or Poste will do) and the subscription is via fax or letter, not phone, email or online, which is a bit old fashion. I personally ran some scenarios, and if you do not plan to invest regularly (cost average) but you plan to put one off or maybe two three, SQ is acceptable for me.

For ETFs, few stocks I have IB but I am more into diversifying as well my positions in banks/brokers.
If you want more info, please let me know.

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Thanks for sharing!

Could you please share a bit more on how you started this process? Also, is there any way to check your position online?

Thanks!

I contacted Fundsmith directly and I explained them what I wanted and they suggested the SICAV in Luxembourg. My main concern, from past experience, was if they will apply any tax on capital gain to which via phone, the SICAV management confirmed that they will reimburse the gross and it is my responsibility to pay the taxes based on my residence(s).

Again, I would like to remark that there are other platforms where you can get it such as Swissquote or HL in UK. Fees are higher than the SICAV but you might have better control in other aspects.

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SSON has pretty much smashed it, against VOO and SLYV which I put as benchmarks. Impressive.

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Hey for all people interested in Fundsmith / Terry Smith, he just published a new book about their investment strategy - Investing for Growth.

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Unfortunately it is so new that there are no reviews, let me know if you buy it.
His perspective as an active fund manager should be really interesting, I’m curious to know what he has to say even if he is of course selling his fund.

Similar content to the AGM video posted above in regards to strategy/company selection which is recommended to watch. His earlier book Accounting for Growth is another good read (hard to get hold of in CH) which breaks down how companies have failed in the past and what he looks for. On that subject The Signs Were There is a more modern alternative that has a similar approach at dissecting accounting practices to uncover companies which are set to take a dive. Recommended reading if Fundsmith interests you.

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Did any one of you read it and have any comments about it? I mean is it any of any use for a mustachian?

oh there are some, just not on amzn

“The book, Investing For Growth, is an anthology of essays and letters written by Smith between September 2010 to August 2020. It includes over seventy of Terry’s extensive essays and letters published in Investment Week, The Telegraph, Straight Talking, The Guardian and the FT as well as the annual Fundsmith letters to shareholders. …” source

Well, i guess not for you since you have to ask this

I ordered the book but did not receive it yet so i cannot comment so far.

On the other hand, Smith was recently in an interview in which he made excellent points regarding his investment philosophy: look for excellent businesses (high returns on capital) at a fair price.

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It looks like Interactive Brokers increased their fund offering and Fundsmith seems available with multiple share classes

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Great news!
Can you share some tickers to look into (I know of SSON and FEET)?

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Hi dbu,
I agree this is great news

I own FUNDSMITH EQUITY “I” (GBP) ACC in a brokerage account outside of IB. “I” (Institution) class is the best to own with lowest fees (0.95%). IB wouldn’t let me buy this one unless I spent GBP 5m! I have sent IB a message since the point of this share class is that in aggregate IB and other broker have >GBP5m holding which is why they get lower fees. I will share the IB response

The next best share class is FUNDSMITH EQUITY “T” (GBP) ACC which has 0.2% higher fees and looks like it is readily purchasable on IB. I did not buy because I am waiting for the answer on the I class.

Avoid the “R” class with high fees. You can see fees for each share class on Fundsmith website.

To find in IB use the search function. For example in the iOS app click the search button, type Fundsmith, and then “Funds->”. As this is an open ended fund it doesn’t have a ticker as such.

It was already possible to buy SSON and FEET in IB. I own some SSON.

Here also the link to IB’s mutual fund search tool. Choose country Switzerland & Fund Family “Fundsmith”

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Would you even be able to, since you are not an “institution”? :slight_smile:

Thank you for the details!