With the ongoing volatility in the investment markets we have been witnessing over recent months, which is now being compounded by uncertainty around the Ukraine,  its worth looking at how the UK’s largest retail fund, Fundsmith Equity is fairing; and the answer is not very well.

Since the start of the year Fundsmith has fallen -17.5% which is its biggest fall since the fund was launched in 2010. In 2020, during the COVID crisis and the first lockdown in March of that year it fell -15%.

Now, Fundsmith is a pure active fund and can certainly be classed as a stockpickers fund and the manager Terry Smith only invests in 28 or 29 different shares. The largest holdings have been Paypal, Facebook and Microsoft and tech stocks have taken quite a hit since Christmas. Turning off QE, inflationary worries in the US and a return to work has all affected the performance of these shares which has affected the fund greatly.

So, has Terry Smith turned into a pumpkin overnight? I don’t think so. He has a very strict criteria about which shares he buys and believes that there are only 72 companies in the World that pass his test for potential investment. Most of the shares he holds are household names that have global reach and I am convinced that he will bounce back when things start to recover.

If you look at longer term performance, you can see why it has been so successful. If we compare Fundsmith against Vanguard Lifestrategy 100% Equity which is a portfolio of global equities and is a very good solution. Over 10 years Fundsmith has done extremely well and achieved a return of 330.61% against Vanguards very good 171.18%,

Ukraine hasn’t really had a major effect on the performance yet, but we will continue to monitor the fund for signs of longer-term decline and will comment accordingly.

However, if you have concerns please discuss with your adviser and as always funds can fall as well as rise and past performance is no guide to future returns.

Phil J McGovern FPFS

Chartered Financial Planner