Star stockpicker to close emerging markets fund: Terry Smith quits struggling £325m trust
Fund cut: Star breeder Terry Smith has closed his £325million Fundsmith Emerging Equities Trust
Terry Smith shocked the investment industry by announcing plans to shut down its emerging markets fund.
The popular stockpicker, who founded Fundsmith in 2010, is to close the £325m Fundsmith Emerging Equities Trust (FEET) because its performance fell short of expectations. The move stunned the city, with one analyst saying Smith was “fired” from a fund that was still earning him significant fees.
Fundsmith currently manages four funds. Its flagship Fundsmith Equity vehicle manages £23.5 billion of savers’ money. But whereas an investor who invested their savings in Fundsmith Equity in 2010 would now be sitting on six times their money, those in FEET are not so lucky.
Since the publicly traded trust was founded in 2014, it has returned 22.3% – and has underperformed its benchmark, the MSCI Emerging & Frontier Markets Index, which has risen 67.9% .
Smith, 69, based in Mauritius, said: “We have always maintained that we would only manage funds where we felt we had a particular advantage that would allow us to provide superior risk-adjusted returns.
‘Although FEET has delivered a positive return since its launch in 2014, it has fallen short of our expectations and unlike other fund managers who may seek to hold the fund for the benefit of fee income, we believe that would be in the best interest. shareholders to recover their investment in cash through the liquidation of the portfolio and the liquidation of the company.
Several industry experts said the move was unprecedented in their brief.
Fundsmith currently manages four funds. Its flagship Fundsmith Equity vehicle manages £23.5bn of savers’ money
Some have had to give up funds by investors – Nelson Peltz, father-in-law of Brooklyn Beckham, was recently pressured to close London-based Trian Investors 1.
Neil Woodford’s empire crumbled after Link, who oversaw his operations, shut down his fl Woodford Equity Income fund following poor performance.
Jason Hollands of investment platform Bestinvest said: “It’s hard to think of a previous example, certainly in recent history, of a fund manager deciding to lay off.” Dzmitry Lipski, at Interactive Investor, praised Smith, saying it “may be much better to wind up an investment trust and return the money to the shareholders, than limping along for years.”
FEET held few companies exposed or based in China, but as the country is the world’s second largest economy, avoiding it weighed on performance.
If shareholders support the liquidation, all assets will be sold, with the money going to investors.