Surrender? Never. The UK’s most popular money manager says he’ll keep “going through hell” after his fund’s first down year in over a decade.
(Bloomberg) — Surrender? Never. The UK’s most popular money manager says he’ll keep “going through hell” after his fund’s first down year in over a decade.
Terry Smith, who manages the UK’s largest equity fund, says his firm will press on in the face of challenging performance as he defended last year’s poor returns in a letter to investors published Tuesday. The new economic reality of higher interest rates and inflation “holds few fears” for him, he added.
“Last year in this letter I said I thought we were probably in for an uncomfortably bumpy ride in terms of valuations,” he wrote in the 19-page letter. “We have no idea when the current period of inflation and central bank interest rate rises which caused this prediction to come true will end.”
Smith’s £22.8 billion ($27.7 billion) Fundsmith Equity fund lost almost 14% of its value in 2022, according to data compiled by Bloomberg. He runs a concentrated strategy of around 30 stocks and Microsoft Inc., Novo Nordsik, Philip Morris International Inc. and L’Oreal SA are among his largest holdings.
The letter comes a day after annual accounts for Fundsmith revealed Smith, 69 and a resident of Mauritius, paid himself a record £36.4 million for the year through March 2022 as profits rose to £58.2 million.
Other fund managers have also suffered in the past year as central banks roll back years of quantitative easing to fight spiraling inflation. The Blue Whale Growth fund, managed by Peter Hargreaves’ protege Stephen Yiu, lost around 30% of its value last year, while Nick Train’s £5.5 billion Global Equity fund fared better and was down less than 5%.
Smith, who has a mantra of “buy good companies, don’t overpay, do nothing,” has returned more than 300% over the past decade and has created a following of loyal retail investors.
“I will leave you this year with a quote from Winston Churchill,” Smith wrote. “‘If you are going through hell, keep going’. At Fundsmith we intend to.”
(Updates with peer performance in the sixth paragraph)
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