From Morningstar:

Terry Smith, manager of Fundsmith Equity, explains in his annual letter why the fund underperformed against the global stock market. In 2023, the fund’s T class accumulation shares rose by 12.4%, while the MSCI World Index grew by 16.8%. Notably, Fundsmith does not hold Nvidia, one of the key share price success stories of last year. The fund does, however, hold Microsoft and Meta Platforms, both top contributors to its performance.

Smith also discusses some of the fund’s bets that did not perform as well, such as Estée Lauder and McCormick, which detracted from the fund’s performance in 2023. The fund sold stakes in Estée Lauder, Adobe, and Amazon, and purchased shares in Procter & Gamble, Marriott, and Fortinet. Fundsmith did not feature in the best or worst performing funds lists for UK investors, but did end the year in the top 20th percentile overall.

Commenting on Terry Smith’s letter to investors, Laith Khalaf, head of investment analysis at AJ Bell, noted that while returns were behind the global stock market last year, they were still strong in absolute terms. However, the fund is now underperforming on both a three- and five-year view, making it harder for the fund to attract new investors.



Read more: Fundsmith Underperforms, Smith Takes Aim at AI Hype