Fundsmith — Profile of Terry Smith's Quality Growth Fund
Fundsmith — Terry Smith's quality growth fund. Buy good companies, don't overpay — and, since 2026, no longer quite 'do nothing'. The full profile incl. the 2026 pivot.
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Fundsmith — 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 flagship fund grew to a ~£29 billion peak on three rules: buy good companies, don't overpay, and do nothing. After years of underperformance it has shrunk to roughly £12 billion (~$16B) — and in 2026 Smith himself retired the "do nothing" leg, lifting turnover above 50% in a sweeping portfolio overhaul.
Quick Answer
Fundsmith is a quality growth fund founded by Terry Smith in 2010 and based in London, whose flagship Fundsmith Equity Fund now manages roughly £12 billion (~$16B) — down from a ~£29B peak after underperforming MSCI World every year since 2022 (H1 2026: −2.9% vs +11.2%). Its stated anti-complexity philosophy — "buy good companies, don't overpay, do nothing" — favours high-ROCE (typically 20%+), low-capital-intensity, recurring-revenue businesses with pricing power. The portfolio remains concentrated at roughly 25-30 stocks, but 2026 marked a strategic pivot: turnover jumped above 50% in H1 as Smith exited Unilever and Novo Nordisk (which he called "an investment disaster") and rotated into power infrastructure, payments and streaming — 12 new buys in six months. US-reported holdings are led by Marriott, Stryker, Waters, Visa and Uber. 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 (flagship fund) | ~£12 billion / ~$16B (2026; peak ~£29B) |
| 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 L'Oréal, Microsoft, Visa (Novo Nordisk was sold in 2026 after Smith labelled it "an investment disaster")
Savings in one bank, investments in another? See it all in one place — and how many months it could carry you.
See your Freedom Runway — freeKey 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 | Historically ~5-10%; jumped above 50% in H1 2026 during the strategic overhaul |
| 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?
The first decade was exceptional — Fundsmith became one of the UK's largest funds and beat global indices handily. Since 2022, however, it has underperformed MSCI World every calendar year, including −2.9% vs +11.2% in the first half of 2026, and assets have roughly halved from the peak as investors withdrew.
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 historically extremely low portfolio turnover — around 5–10% per year — meaning Terry Smith rarely bought or sold. The idea: once a high-quality company is owned at a sensible price, the best action is usually to hold it and let compounding work. Note, however, that 2026 broke with this rule — turnover exceeded 50% in the first half as Smith overhauled the portfolio (12 new buys, exits including Unilever and Novo Nordisk), so "do nothing" is now more legacy branding than current practice.
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.