2019-08-01_Shares_Magazine

FUNDS

26 | SHARES | 01 August 2019

F

ollowing our cover story

on the risks associated

with ‘star managers’, in

ƚŚĞĂŌĞƌŵĂƚŚŽĨƚŚĞƐƵƐƉĞŶƐŝŽŶ

ŽĨƚŚĞŇĂŐƐŚŝƉ Woodford Equity

Income Fund (BLRZQ73) , we are

ůĂƵŶĐŚŝŶŐĂŶĞǁĨĞĂƚƵƌĞůŽŽŬŝŶŐ

ĂƚƚŚĞh<͛ƐŵŽƐƚƉŽƉƵůĂƌĨƵŶĚƐƚŽ

ĂŶĂůLJƐĞƚŚĞŝƌŝŶǀĞƐƚŵĞŶƚƉƌŽĐĞƐƐ

ĂŶĚƚŚĞŝƌƚŽƉŚŽůĚŝŶŐƐ͘

ƐǁĞĞdžƉůĂŝŶĞĚƉƌĞǀŝŽƵƐůLJ͕

ǁŚĞŶĐŚŽŽƐŝŶŐĂĨƵŶĚŽƌƚƌƵƐƚ

ŝƚ͛ƐŝŵƉŽƌƚĂŶƚƚŽƵŶĚĞƌƐƚĂŶĚƚŚĞ

ŵĂŶĂŐĞƌ͛ƐƉƌŽĐĞƐƐĂŶĚǁŚLJƚŚĞLJ

ŽǁŶǁŚĂƚ͛ƐŝŶƚŚĞŝƌƉŽƌƞŽůŝŽ͘/Ĩ

LJŽƵĚŽŶ͛ƚƵŶĚĞƌƐƚĂŶĚŽƌĚŽŶ͛ƚĨĞĞů

ĐŽŵĨŽƌƚĂďůĞ͕ƚŚĞŶĚŽŶ͛ƚŝŶǀĞƐƚ͘

STAR QUALITY WITH

A CLEAR PROCESS

KŶĞŽĨƚŚĞďŝŐŐĞƐƚĂŶĚŵŽƐƚ

ƐƵĐĐĞƐƐĨƵůĨƵŶĚƐƐŝŶĐĞŝƚƐůĂƵŶĐŚ

in 2010, Fundsmith Equity

(B41YBW7) is now valued

ĂƚάϭΘ͘ϯďŶ͘&ŽƵŶĚĞĚďLJƐƚĂƌ

ĂŶĂůLJƐƚͲƚƵƌŶĞĚͲĨƵŶĚŵĂŶĂŐĞƌ

dĞƌƌLJ^ŵŝƚŚ͕ŝƚŚĂƐĂǀĞƌLJƐŝŵƉůĞ

ƚŚƌĞĞͲƐƚĞƉŝŶǀĞƐƚŵĞŶƚƉƌŽĐĞƐƐ͗

ďƵLJŐŽŽĚĐŽŵƉĂŶŝĞƐ͕ĚŽŶ͛ƚ

ŽǀĞƌƉĂLJĂŶĚĚŽŶŽƚŚŝŶŐ͘

Rather than having a glossy

ďƌŽĐŚƵƌĞ͕ƚŚĞĨƵŶĚŚĂƐĂϮϬͲƉĂŐĞ

͚KǁŶĞƌ͛ƐDĂŶƵĂů͛ĨŽƌŝŶǀĞƐƚŽƌƐ

ďĞĐĂƵƐĞ͚LJŽƵƌƵŶĚĞƌƐƚĂŶĚŝŶŐŽĨ

what we are trying to achieve

ĂŶĚŚŽǁǁĞǁŝůůĂƉƉƌŽĂĐŚŝƚŝƐĂ

ĐƌŝƟĐĂůĞůĞŵĞŶƚŝŶĞŶĂďůŝŶŐƵƐƚŽ

ĂƩĂŝŶŽƵƌŐŽĂů͛͘

WHAT DOES IT

SAY ON THE TIN?

&ƵŶĚƐŵŝƚŚŝŶǀĞƐƚƐŝŶĞƋƵŝƟĞƐ

LJƐƟĐŬŝŶŐƚŽƚŚĞƐĞĐƌŝƚĞƌŝĂ

&ƵŶĚƐŵŝƚŚďƵŝůĚƐĂƉŽƌƞŽůŝŽ

ŽĨ͚ƌĞƐŝůŝĞŶƚďƵƐŝŶĞƐƐĞƐǁŝƚŚ

ĞdžĐĞůůĞŶƚƉĞƌĨŽƌŵĂŶĐĞ͛͘

/ŵƉŽƌƚĂŶƚůLJ͕ŝƚŝƐƐƚƌƵĐƚƵƌĞĚ͚ƚŽ

survive Terry Smith’s demise

ĂŶĚĐŽŶƟŶƵĞǁŝƚŚƚŚĞƐĂŵĞ

ŝŶǀĞƐƚŵĞŶƚƉŚŝůŽƐŽƉŚLJ͛͘

dŚĞĨƵŶĚŝƐĂůƐŽĐůĞĂƌŽŶǁŚĂƚ

it won’t ĚŽ͗ƚƌĂĚĞƐŚŽƌƚͲƚĞƌŵ

ŽƌĂƩĞŵƉƚƚŽƟŵĞƚŚĞŵĂƌŬĞƚ͕

ĂĚŽƉƚŚĞĚŐŝŶŐƐƚƌĂƚĞŐŝĞƐŽƌƵƐĞ

ĚĞƌŝǀĂƟǀĞƐ͕͚ŚƵŐ͛ƚŚĞŝŶĚĞdž͕ƐŚŽƌƚ

ƐƚŽĐŬƐ͕ŽƌĐŚĂƌŐĞƵƉĨƌŽŶƚĨĞĞƐŽƌ

ƉĞƌĨŽƌŵĂŶĐĞĨĞĞƐ͘

HOW DOES IT

WORK IN PRACTICE?

tŝƚŚƐƵĐŚĂƌŝŐŽƌŽƵƐƐĞůĞĐƟŽŶ

ƉƌŽĐĞƐƐŝƚ͛ƐŶŽƚƐƵƌƉƌŝƐŝŶŐƚŚĂƚ

ĨĞǁƐƚŽĐŬƐŵĂŬĞƚŚĞŐƌĂĚĞ͘

ƐƚŚĞĨĂĐƚƐŚĞĞƚĞdžƉůĂŝŶƐ͕

͚ƚŚĞĂƉƉůŝĐĂƟŽŶŽĨƚŚĞƐĞ

ŝŶǀĞƐƚŵĞŶƚĐƌŝƚĞƌŝĂƐŝŐŶŝĮĐĂŶƚůLJ

ůŝŵŝƚƐƚŚĞŶƵŵďĞƌŽĨƉŽƚĞŶƟĂů

ŝŶǀĞƐƚŵĞŶƚƐ͛͘

dŚĞĐƵƌƌĞŶƚŶƵŵďĞƌŽĨ

ŚŽůĚŝŶŐƐŝƐϮϳ͕ƚŽǁĂƌĚƐƚŚĞƚŽƉŽĨ

ƚŚĞĞƐƟŵĂƚĞĚƌĂŶŐĞŽĨϮϬƚŽϯϬ

ŚŽůĚŝŶŐƐĂƚĂŶLJŐŝǀĞŶƟŵĞ͘/ŶƚŚĞ

ůĂƐƚLJĞĂƌƚŚĞƉŽƌƞŽůŝŽƚƵƌŶŽǀĞƌ

ƌĂƟŽʹƚŚĞƉĞƌĐĞŶƚĂŐĞŽĨƚŚĞ

ĨƵŶĚǁŚŝĐŚŚĂƐĐŚĂŶŐĞĚʹŝƐ

ũƵƐƚϭϯ͘κйŵĞĂŶŝŶŐŽŶůLJƚŚƌĞĞ

ŽƌĨŽƵƌƐƚŽĐŬƐŚĂǀĞďĞĞŶďŽƵŐŚƚ

ŽƌƐŽůĚ͘

ǀĞŶŵŽƌĞŝŵƉƌĞƐƐŝǀĞ͕ϭϭŽĨ

ƚŚĞƐƚŽĐŬƐŝŶƚŚĞƉŽƌƞŽůŝŽĂƚƚŚĞ

ĞŶĚŽĨůĂƐƚLJĞĂƌŚĂĚďĞĞŶƚŚĞƌĞ

ƐŝŶĐĞƚŚĞĨƵŶĚǁĂƐůĂƵŶĐŚĞĚŝŶ

ϮϬϭϬ͘dŚŝƐŝƐƚŚĞ͚ĚŽŶŽƚŚŝŶŐ͛

ĂƉƉƌŽĂĐŚ͘'ŽŽĚĐŽŵƉĂŶŝĞƐ

ĂĐƌŽƐƐƚŚĞŐůŽďĞŽŶĂůŽŶŐͲƚĞƌŵ

ďĂƐŝƐƵƐŝŶŐ͚ƐƚƌŝŶŐĞŶƚŝŶǀĞƐƚŵĞŶƚ

ĐƌŝƚĞƌŝĂ͛ƚŽƐĞůĞĐƚŽŶůLJďƵƐŝŶĞƐƐĞƐ͗

• ǁŚŝĐŚĂƌĞŚŝŐŚͲƋƵĂůŝƚLJĂŶĚ
  can sustain a high return
  ŽŶŽƉĞƌĂƟŶŐĐĂƉŝƚĂů
  ĞŵƉůŽLJĞĚ;ZKͿ


• whose advantages are
  ĚŝĸĐƵůƚƚŽƌĞƉůŝĐĂƚĞ


• ǁŚŝĐŚĚŽŶŽƚƌĞƋƵŝƌĞ
  ƐŝŐŶŝĮĐĂŶƚůĞǀĞƌĂŐĞƚŽ
  ŐĞŶĞƌĂƚĞƌĞƚƵƌŶƐ;ƚŚĞƌĞĨŽƌĞ
  ƚLJƉŝĐĂůůLJŶŽƚďĂŶŬƐŽƌƵƟůŝƟĞƐͿ


• ǁŝƚŚĂŚŝŐŚĚĞŐƌĞĞŽĨ
  ĐĞƌƚĂŝŶƚLJŽĨŐƌŽǁƚŚĨƌŽŵ
  ƌĞͲŝŶǀĞƐƟŶŐƚŚĞŝƌĐĂƐŚŇŽǁƐ
  ĂƚŚŝŐŚƌĂƚĞƐŽĨƌĞƚƵƌŶ


• which are resilient to
  ĐŚĂŶŐĞ͕ƉĂƌƟĐƵůĂƌůLJ
  ƚĞĐŚŶŽůŽŐŝĐĂůŝŶŶŽǀĂƟŽŶ


• ďƵƐŝŶĞƐƐĞƐĂƚĂƩƌĂĐƟǀĞ
  ǀĂůƵĂƟŽŶƐ

Terry Smith’s creation is one of the best and most popular funds for very good reasons

Know your fund: what’s

inside Fundsmith Equity?

'ƵŝŶŶĞƐƐŽǁŶĞƌŝĂŐĞŽŝƐŝŶƚŚĞƉŽƌƞŽůŝŽ