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A Guide to Investing in the Fundsmith Equity Fund in Singapore

Fundsmith Equity Fund is a renowned investment fund that has gained significant attention in the financial industry. Managed by Fundsmith LLP, an asset management firm founded by Terry Smith in 2010, the Fundsmith Equity Fund has established a reputation for its disciplined investment approach and impressive performance track record.

The Fundsmith Equity Fund focuses on long-term investments in high-quality companies with sustainable business models. It follows a concentrated portfolio strategy, typically investing in around 20 to 30 companies across various sectors and regions. The fund’s objective is to achieve long-term capital growth by investing in companies that have the potential to generate superior returns over time.

One of the key principles behind the Fundsmith Equity Fund’s success is its emphasis on investing in businesses with durable competitive advantages. Terry Smith and his team thoroughly analyze companies, seeking those with strong market positions, pricing power, and robust cash flows. By selecting companies with these characteristics, the fund aims to generate consistent returns even in challenging market conditions.

Another notable aspect of the Fundsmith Equity Fund is its long-term investment horizon. Terry Smith believes in holding investments for the long term, allowing companies to compound their earnings and create value over time. This patient approach aligns with the fund’s objective of capital growth and provides investors with the potential for significant returns over the years.

Fundsmith Equity Fund also stands out for its transparent and straightforward investment philosophy. Terry Smith believes in keeping things simple and avoiding complex financial instruments or speculative investments. The fund focuses on owning high-quality stocks and holding them for the long haul, minimizing unnecessary trading and transaction costs.

Furthermore, the Fundsmith Equity Fund places great importance on understanding the businesses it invests in. The fund’s team conducts in-depth research and analysis to gain a deep understanding of a company’s fundamentals, competitive advantages, and growth prospects. This rigorous approach helps in identifying companies that align with the fund’s investment philosophy and have the potential to deliver attractive returns.

The Fundsmith Equity Fund’s performance has been exceptional since its inception. It has consistently outperformed its benchmark and delivered impressive returns for its investors. The fund’s success can be attributed to its disciplined investment strategy, focus on high-quality companies, long-term perspective, and a strong emphasis on fundamental analysis.

Investing in the Fundsmith Equity Fund offers investors the opportunity to benefit from the expertise of Terry Smith and his team, who have a proven track record of selecting successful investments. The fund’s emphasis on quality, simplicity, and long-term value creation provides a compelling investment proposition for individuals seeking exposure to well-managed companies with sustainable growth potential.

Returns of the Fundsmith Equity Fund

The investment objective of the Fundsmith Sub-fund is focused on achieving long-term growth in value through its global equity investments. With a strategic emphasis on long-term holdings, the Sub-fund aims to avoid short-term trading strategies, reflecting a commitment to stability and sustained growth over time.

The Sub-fund’s performance is highlighted through its annualized returns over various time frames. Over the past year (Accurate as of 11/4/2024), it has demonstrated a strong annualized return of 14.43%, indicating robust performance in the short term. Looking further out, over three years, the Sub-fund has delivered a respectable annualized return of 6.05%, showcasing consistent growth over a slightly longer horizon. Similarly, over five years, investors have seen an annualized return of 9.21%, indicating sustained growth and stability over a medium-term period. Impressively, over a decade, the Sub-fund has achieved a notable annualized return of 14.24%, underlining its ability to generate significant value for investors over the long term.

It’s important to note that these figures are annualized returns and should not be interpreted as a guarantee of future performance. Nonetheless, they serve as a testament to the Sub-fund’s historical performance and its potential to deliver substantial returns to investors who adopt a long-term investment horizon.

Top 10 holdings of the Fundsmith Equity Fund

The top 10 holdings of the Fundsmith Equity Fund provide a snapshot of its investment portfolio, reflecting a diverse mix of prominent companies across various sectors. Microsoft stands out as a leading technology giant, known for its innovative software solutions and robust market presence. Novo Nordisk, a pharmaceutical company, demonstrates the fund’s interest in healthcare, particularly with its focus on diabetes care. Meta Platforms, formerly known as Facebook, underscores the fund’s investment in the digital realm, leveraging the social media landscape. L’Oréal represents the consumer goods sector, renowned for its extensive range of beauty and cosmetic products.

Additionally, Stryker, a major player in the medical technology field, reflects the fund’s confidence in companies driving advancements in healthcare. Visa, a global payments technology company, signifies the fund’s interest in the financial services sector, particularly in facilitating electronic payments. LVMH, a conglomerate with a diverse portfolio of luxury brands, demonstrates the fund’s exposure to the luxury goods market. IDEXX, a leader in veterinary diagnostics and software, showcases the fund’s investment in niche sectors with significant growth potential.

Furthermore, Philip Morris, a multinational tobacco company, reflects the fund’s approach to investing in companies with enduring market positions and strong cash flows. Lastly, Automatic Data Processing, a provider of human capital management solutions, highlights the fund’s interest in companies offering essential services to businesses. Collectively, these top holdings reflect the Fundsmith Equity Fund’s strategy of investing in high-quality companies with sustainable business models and long-term growth potential across various industries.

The Principles of Fundsmith Equity Fund

Fundsmith Equity Fund operates on a set of guiding principles aimed at fostering a fair and transparent investment environment. These principles include a performance-based fee structure, wherein investors are not subject to additional charges for outstanding performance. Moreover, there are no upfront fees for direct investors, ensuring accessibility to all. The fund advocates for straightforward investing, steering clear of complexities and gimmicks. It also avoids involvement with debt instruments and derivatives, prioritizing stability in investment choices.

Furthermore, the fund abstains from short selling to mitigate potential losses. It refrains from attempting to time the market and instead focuses on active investment strategies, making proactive decisions rather than passively tracking indices. Additionally, Fundsmith emphasizes minimal trading, opting for stable, long-term investments over frequent buying and selling. Lastly, it eschews hedging to fully capitalize on potential profits.

Fundsmith Equity Fund Investment Strategy

The investment strategy of Fundsmith Equity Fund revolves around a commitment to long-term equity investment, prioritizing a global perspective to capitalize on opportunities over extended periods. Central to this strategy is the adherence to stringent investment criteria, ensuring that only the most promising stocks are chosen for inclusion in the fund’s portfolio. These criteria encompass several key factors, including a track record of consistent above-average returns, the presence of competitive advantages that are challenging to replicate, and a limited reliance on loans for generating returns.

Additionally, investments are sought in businesses with a high degree of certainty regarding growth from reinvestment, along with resilience to technological innovations that may disrupt industries. Fundsmith also places a premium on attractive valuations, meticulously evaluating each potential investment opportunity to ensure it aligns with its valuation standards. Through this comprehensive approach, Fundsmith aims to deliver sustainable, long-term growth for its investors while managing risk effectively.

Understanding the value and investment strategy of the Fundsmith Equity Fund holds paramount importance as they delineate the fund’s approach towards risk management, return generation, and long-term performance sustainability. By steadfastly avoiding various pitfalls such as exorbitant fees, debt, derivatives, short selling, market timing, and hedging, the fund underscores its commitment to transparent, uncomplicated, and resilient investing practices.

At the heart of its strategy lies a deliberate emphasis on investing in high-caliber businesses boasting robust competitive advantages, consistent above-average returns, and a judicious avoidance of excessive reliance on loans. Furthermore, the strategy promotes growth through reinvestment, prioritizing businesses resilient to market vicissitudes and presenting attractive valuations. This meticulous approach is geared towards furnishing investors with a vehicle for attaining sustainable, long-term growth, resonating strongly with those seeking a disciplined, cost-effective, and high-quality investment avenue.

The efficacy of Fundsmith Equity Fund’s strategy is vividly underscored by its consistent outperformance, substantially surpassing benchmarks with an impressive annualized return of 15.1% since its inception in November 2010. Such remarkable performance not only validates the soundness of the fund’s strategy but also underscores its potential to deliver enduring value to investors over time.

How to Buy Fundsmith Equity Fund in Singapore

Investing in the Fundsmith Equity Fund in Singapore can be pursued through two primary avenues. Firstly, direct purchase of the fund is typically reserved for accredited investors. Alternatively, one can opt for an investment-linked policy (ILP) as another viable option.

For those meeting the criteria as an Accredited Investor in Singapore, direct acquisition of the Fundsmith Equity Fund is feasible. To qualify, individuals must meet one of four financial benchmarks, such as maintaining a minimum income of $300,000 SGD over the past year or possessing net personal assets exceeding $2 million SGD, with certain restrictions on the valuation of primary residences. Additionally, a joint account with an Accredited Investor is an alternative avenue for eligibility. As an Accredited Investor, purchasing the Fundsmith Equity Fund can be facilitated independently through a licensed financial advisor, though minimum investment requirements may apply, and details should be confirmed with respective agents.

However, for the majority of individuals residing in Singapore, the ILP route offers broader accessibility, as it doesn’t necessitate Accredited Investor status. Through an ILP, managed by insurance companies, retail investors can gain exposure to exclusive investment funds, including the Fundsmith Equity Fund. These ILPs pool capital from policyholders, granting access to premium investment opportunities otherwise unavailable.

Notably, several insurance companies in Singapore offer ILPs with sub-funds containing the Fundsmith Equity Fund, catering to retail investors’ needs. Among these companies are HSBC Life, Etiqa, Tokio Marine, Singlife, and FWD. Engaging with these ILPs provides a pathway for normal investors to access prestigious investment funds without the requirement of Accredited Investor status, ensuring broader participation in premium investment opportunities.

The Fundsmith Equity Fund has solidified its reputation as a top-tier investment vehicle, buoyed by its disciplined investment methodology and dependable track record. Emphasizing high-quality companies and a long-term outlook, the fund appeals to investors seeking transparency and consistent performance. Led by Terry Smith and his team, the fund adeptly navigates market fluctuations, making it an appealing option for those prioritizing sustained capital growth through a patient and steadfast investment approach.

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