Fundsmith — Profile of Terry Smith's Quality Growth Fund
Fundsmith — Terry Smith's quality growth fund with $25B+ AUM. Buy good companies, don't overpay, do nothing. The anti-complexity investing approach. Complete profile.
10 min czytaniaFundsmith — Buy Good Companies, Don't Overpay, Do Nothing
Fundsmith is a quality growth fund built on one of the simplest investment philosophies in the world. Founded by Terry Smith in 2010, the fund has grown to over $25 billion by following three rules: buy good companies, don't overpay, and do nothing. No trading. No market timing. Just compounding.
Quick Answer
Fundsmith is a quality growth fund founded by Terry Smith in 2010 and based in London, now managing around $25 billion through its flagship Fundsmith Equity Fund. Its deliberately anti-complexity philosophy follows three rules — "buy good companies, don't overpay, do nothing" — favouring high-ROCE (typically 20%+), low-capital-intensity, recurring-revenue businesses with pricing power and global brands. The portfolio is concentrated at roughly 25-30 stocks with extremely low (~5-10%) turnover and multi-year holding periods, clustered in consumer staples, healthcare and technology while avoiding banks, airlines, utilities and commodities. Current holdings appear in the fund's regular factsheets. This is an educational profile of the fund's approach, not investment advice.
Key Facts
| Parameter | Value |
|---|---|
| Founder & CEO | Terry Smith |
| Style | Quality growth, buy and hold |
| AUM | ~$25 billion (2025) |
| Headquarters | London, UK |
| Founded | 2010 |
| Flagship Fund | Fundsmith Equity Fund |
| Holdings | ~25-30 stocks |
| Motto | "Buy good companies, don't overpay, do nothing" |
Investment Philosophy
Fundsmith's philosophy is deliberately anti-complexity:
The Three Rules
- Buy good companies — high ROCE, strong margins, recurring revenue, low capital intensity
- Don't overpay — disciplined on valuation, but quality commands a premium
- Do nothing — minimal trading, hold for years, let compounding work
What Makes a "Good Company"
- High returns on capital employed (ROCE) — typically 20%+
- Low capital requirements — profits don't need to be reinvested in factories or equipment
- Recurring revenue — consumers buy the products repeatedly
- Pricing power — can raise prices without losing customers
- Global brands — think Novo Nordisk, L'Oréal, Microsoft
Key People
- Terry Smith — Founder and CIO. Previously a top-rated analyst and CEO of financial firms. Launched Fundsmith at age 57 — it became one of the UK's most popular funds within years. Known for blunt, no-nonsense communication.
Portfolio Characteristics
| Trait | Detail |
|---|---|
| Holdings | ~25-30 global companies |
| Turnover | Extremely low (~5-10%) |
| Geography | Global (US-heavy, Europe, some EM exposure) |
| Sectors | Consumer staples, healthcare, technology |
| Avoided | Banks, airlines, commodities, utilities, cyclicals |
| Typical holding period | 5-10+ years |
Why Track Fundsmith?
Terry Smith has built one of the most successful funds in UK history by ignoring 90% of what the market obsesses over. When Fundsmith adds or removes a stock, it's a significant signal — because they rarely make changes.
What you can learn:
- Simplicity wins — three rules can beat thousands of complicated strategies
- Do nothing — the best investment move is often no move at all
- Quality beats timing — great businesses recover from every downturn
- Low turnover — minimize costs, taxes, and mistakes by trading less
Track Fundsmith's quality holdings with Freenance and see how "do nothing" investing can accelerate your Financial Freedom Runway.
FAQ
What is Fundsmith's track record?
Since launching in 2010, Fundsmith Equity Fund has significantly outperformed global indices, delivering strong annual returns with lower volatility. It became one of the UK's largest and most popular investment funds within a decade.
Can non-UK investors access Fundsmith?
Yes — Fundsmith offers the Equity Fund for UK investors and the Fundsmith SICAV for international investors. Both follow the same strategy and hold the same companies.
Why does Terry Smith avoid banks and airlines?
Smith avoids capital-intensive businesses that require constant reinvestment and are vulnerable to external shocks. Banks have regulatory and credit risk, airlines have high fixed costs and commodity exposure. Neither fits his model of asset-light, high-ROCE businesses.
What does "do nothing" mean in Fundsmith's strategy?
"Do nothing" refers to Fundsmith's extremely low portfolio turnover — historically around 5–10% per year — meaning Terry Smith rarely buys or sells. The idea is that once a high-quality company is owned at a sensible price, the best action is usually to hold it and let compounding work. Frequent trading, in his view, mainly adds costs and mistakes.
How concentrated is the Fundsmith Equity Fund?
Fundsmith typically holds only around 25–30 global companies, making it a concentrated portfolio relative to broad index funds. Holdings have historically clustered in consumer staples, healthcare, and technology, while banks, airlines, utilities, and commodities are deliberately avoided. Exact holdings are disclosed in the fund's regular factsheets, which are worth checking for current positions.
What is the minimum investment in Fundsmith?
Fundsmith's funds have historically been accessible to retail investors through the Equity Fund for UK savers and the SICAV for international investors, often with relatively modest minimums compared with hedge funds. Minimums, share classes, and availability vary by platform and country, so it is worth checking current disclosures. This is educational research only, not a recommendation to buy the fund.
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