- The Fundsmith Equity Fund is the UK's largest unit trust fund, managing £20.5 billion in assets.
- All 3 Fundsmith funds have underperformed their sector averages over 6 months, 1 year, 3 years, and 5 years - earning each a low 1-star performance rating.
- Despite recent challenges, Fundsmith Equity has delivered long-term growth of 549.59% since launch - more than double the IA Global sector average of 229.41%.
- Smithson and Fundsmith Stewardship have also outperformed their sectors since launch, highlighting the strength of Fundsmith’s early performance up to 2020.
Founded in 2010 by renowned fund manager Terry Smith, Fundsmith has grown into one of the most recognised investment firms in the UK. With just three funds under its management, the firm has attracted more than £24.5 billion in assets - driven largely by the continued popularity of its flagship Fundsmith Equity fund, which is now the largest unit trust in the UK.
Its reputation for simplicity, long-term focus, and straight talking, no frills messaging has earned it a loyal following. But with scale comes scrutiny, and recent performance trends raise important questions about how well Fundsmith’s funds have held up against their peers.
In this review, we analyse the performance of all three Fundsmith funds across multiple timeframes - 6 months, 1 year, 3 years, and 5 years comparing their performance against their sector averages. This analysis provides clarity on whether Fundsmith has continued to deliver for investors and whether its funds remain competitive in an evolving investment landscape.
Fundsmith Fund Performance
The table below shows the performance, sector ranking and performance rating of all 3 Fundsmith funds over a 6 month, 1 year, 3 year and 5 year period.
How Yodelar Rates Fund Performance
All three funds received a poor 1-star rating based on their relative performance, indicating that each has underperformed compared to peers within their sector.
Fundsmith Equity Fund
The Fundsmith Equity Fund, managed by Terry Smith, launched on 1st November 2010 and quickly became one of the most popular funds in the UK. For much of the past decade, it delivered strong returns, but recent performance has fallen short. Assets under management have declined from £24.9 billion in 2024 to £20.5 billion in 2025, reflecting both losses and investor withdrawals.
The fund charges an annual fee of 1.04%, which is higher than the IA Global sector average of 0.84%. While investors have been willing to pay more for a proven approach, the funds comparative performance in recent years has reduced its appeal.
Over the recent 6 month period analysed, the fund fell -7.32% compared to the sector average of -5.40%. Its one-year return was -6.17%, well below the sector’s -0.11%, ranking it 449th out of 512 funds in the IA Global sector. Over three and five years, it returned 12.20% and 43.50%, trailing the sector averages of 15.19% and 60.78%.
Despite the funds comparatively poor performance over the 6 month, 1 year, 3 year, and 5 year periods analysed, since its inception it has still considerably outperformed the sector.
Source: FE Analytics
Since its launch on 1st November 2010, up to 28th April 2025, the Fundsmith Equity Fund has delivered cumulative growth of 549.59% - more than double the sector average of 229.41% over the same period. This highlights the strong long-term value it has provided for investors despite more recent challenges.
Smithson Investment Trust
When the Smithson Investment Trust launched in October 2018, it broke records by raising £822.5 million in its initial public offering - the largest ever for a UK-domiciled investment trust at the time. This level of demand reflected strong investor confidence in Terry Smith’s investment philosophy, now applied to small and medium-sized global companies.
Smith founded the trust on the belief that smaller businesses often deliver better long-term returns than larger ones. With fewer analysts covering mid-sized firms, market prices are more likely to diverge from their true value - creating opportunities that skilled investors can identify and capitalise on.
Like Fundsmith Equity, Smithson follows a disciplined investment process. It focuses on high-quality businesses in sectors with a track record of delivering long-term value and avoids areas that have historically been prone to boom-and-bust cycles - such as mining, speculative technology, or cryptocurrency. Smith has previously emphasised that there are no new ways to make money, only well-established principles that stand the test of time.
Despite underperforming the sector over the past 3 & 5 years, Smithson has performed comparatively strongly in recent times. Over the past six months, it ranked in the top quartile of its sector with a return of -1.36%, outperforming the sector average of -4.49%.
Source: FE Analytics
Although Smithson has underperformed its sector since the COVID-19 market crash in March 2020, its strong start from launch in October 2018 means it still holds a performance edge over the sector overall. From launch to April 2025, the trust has delivered total growth of 42.06%, compared to the sector average of 30.97%.
Fundsmith Stewardship Fund
The Fundsmith Stewardship Fund was launched on 1 November 2017 and is managed by Terry Smith. It was previously known as the Fundsmith Sustainable Equity Fund. As of 24 March 2025, Fundsmith officially renamed the fund to better reflect its stewardship-focused approach.
The fund follows the same global investment strategy as the flagship Fundsmith Equity Fund, concentrating on high-quality companies with strong and sustainable returns.
What sets it apart is its clear ethical and ESG focus. It applies a defined stewardship framework, ensuring that capital is allocated and managed to create long-term value for clients while supporting positive outcomes for the economy, the environment, and society.
As part of this approach, the fund excludes investment in sectors that do not meet its sustainability standards, including:
- Aerospace and Defence
- Metals and Mining
- Brewers, Distillers and Vintners
- Oil, Gas and Consumable Fuels
- Casinos and Gaming
- Pornography
- Gas and Electric Utilities
- Tobacco
The Fundsmith Stewardship Fund currently manages £546 million in assets and, like the Fundsmith Equity Fund, sits within the IA Global sector. It holds a concentrated portfolio of 20 to 30 companies, with a focus on engaging with businesses to improve their sustainability practices. However, the fund’s strict sustainability criteria reduce its investment flexibility, and it has consistently lagged behind the Fundsmith Equity Fund in terms of performance.
Over the past six months, the fund returned negative growth of -8.16%, underperforming the sector average of -5.4%. Its one-year return of -6.36% ranked 453rd out of 512 funds, considerably below the sector average of -0.11%. Over three years, it returned 5.84%, placing 362nd out of 463 funds and well behind the 15.19% sector average. Across five years, the fund delivered growth of 39.81%, again lagging its peer group.
Source: FE Analytics
The above chart shows that since launch in 2018, the Fundsmith Stewardship fund has outperformed the sector average with growth of 78.47% compared to 66.46%, again reflecting Fundsmiths strong performance up to March 2020.
Fundsmith Fund Performance Compared
The below chart tracks the performance of all 3 Fundsmith funds. As the most recent fund launched by Terry Smith was the Smithson investment trust in October 2018 the chart tracks the performance since then.
Source: FE Analytics
The performance chart above identifies that up until the end of 2021, the Smithson investment trust had been the best performer of the 3 with growth peaking at 102% at the end of 2021. However, the first 6 months of 2022 were very poor for Smithson with negative returns of -88%. Since then, the Smithson has failed to match the performance of the Fundsmith Equity and Fundsmith Stewardship funds. The chart also shows that both Fundsmith funds have experienced very similar performance over the period analysed.
Terry Smiths Investment Strategy
Fundsmith’s success is grounded in a straightforward investment strategy, which involves taking bold bets on a small number of companies and holding them for the long term, without paying attention to the quirks of a macroeconomy.
This philosophy reflects Terry Smith’s belief that “nobody is capable of consistently predicting macro events,” and that the real value lies in identifying high-quality businesses - something he refined over decades as an analyst. “You might think every fund manager tries to invest in good companies, but I can assure you they don’t,” he says. “At Fundsmith, we have spent a lot of time defining exactly what a good company is.”
The Type of Companies Fundsmith Invests In:
- high quality businesses that can sustain a high return on operating capital employed;
- businesses whose advantages are difficult to replicate;
- businesses which do not require significant leverage to generate returns;
- businesses with a high degree of certainty of growth from reinvestment of their cash flows at high rates of return;
- businesses that are resilient to change, particularly technological innovation;
- businesses whose valuation is considered by the Company to be attractive.
The Fundsmith approach avoids the use of complex financial instruments. The fund does not invest in derivatives and does not hedge currency risk—whether that comes from owning companies that operate internationally or from holding investments in currencies other than sterling.
Fundsmith focuses on established companies with strong finances and well-known brands. These are businesses that can reinvest their profits to grow steadily over time. The fund avoids more volatile sectors—such as mining and financials—where earnings tend to rise and fall with the economic cycle.
Terry Smith also avoids companies that rely on borrowing to stay afloat, which is why the fund excludes banks. He believes in owning high-quality businesses with consistent performance, and says this is rarer than many investors realise.
Smith has said, “Very few investment managers boast about the fact that they invest in low-quality businesses, but most of them do, often because they consider such businesses as ‘cheap’. He explains that these managers buy struggling companies in the hope that the market will revalue them higher later. But this relies on unpredictable events - like takeovers, management changes, or shifts in market sentiment.
While this strategy may sometimes work, it can take years to play out - or may never happen at all. For Smith, that level of uncertainty makes it a poor foundation for long-term investing.
Global Funds vs Diversified Portfolios: Why Broader Exposure Often Wins
All three Fundsmith funds follow a global investment strategy, which has helped boost their popularity - particularly among investors who treat them as standalone portfolio solutions. More broadly, global funds within the IA Global sector remain a favoured choice due to the simplicity of accessing international markets through a single investment. However, this perceived convenience can be misleading.
While global funds, such as those from Fundsmith, have the freedom to invest across regions, many show a clear bias towards the US market. In particular, large-cap US technology and consumer goods stocks dominate the holdings of many so-called ‘global’ funds. This concentration means that their diversification is more limited than investors often realise.
As a result, performance tends to be driven by a narrow group of companies and regions. Investors who believe they are spreading risk globally may instead be heavily reliant on a small part of the investment universe. This illusion of diversification can expose them to sharper losses when dominant markets falter - especially in periods of US market decline.
In contrast, portfolios built with a blend of high-quality funds - each with distinct geographic or sector exposure - tend to deliver more stable long-term returns. Combining regional specialists, such as Asia Pacific or UK mid-cap equity, with defensive areas like infrastructure, healthcare, or fixed income helps reduce dependence on any one economy or investment theme.
Proper diversification also improves risk control. Markets rarely move in unison, and different regions often respond differently to economic shocks. A portfolio that spreads risk across multiple strategies is better equipped to absorb volatility and deliver consistent performance through different market cycles.
While global funds can play a useful role, they should not form the entire foundation of a portfolio. Our portfolio analysis frequently highlights investors with 100% exposure to the Global sector - an approach that often leaves them far more exposed than they realise.
Ultimately, investors should look beyond fund labels and focus on whether their portfolios provide genuine diversification and effective risk management. A well-structured portfolio, built from complementary funds, is far more likely to deliver the consistency and resilience required for long-term investment success.
Summary
Despite the continued recognition and popularity of Terry Smith’s funds, recent performance has been notably subdued. Over the past year, the Fundsmith Equity Fund was outperformed by 448 of the 512 funds in the IA Global sector.
While all three Fundsmith funds have underperformed their respective sector averages since March 2020, each has still delivered stronger returns than the sector over the full period since launch. This highlights the enduring strength of Fundsmith’s long-term approach, even as recent results suggest limitations in its current positioning.
It also reinforces a broader point: relying too heavily on a single fund or manager increases portfolio risk. Additionally, spreading investments across multiple fund houses can maximise FSCS protection, which covers up to £85,000 per provider. This adds a further layer of risk control that is often overlooked in concentrated portfolios.
Whilst Fundsmith’s funds have each demonstrated strong long-term qualities, over-reliance on them - particularly due to their global strategies - can limit a portfolio’s overall potential. Portfolios that blend high-quality funds, each specialising in a specific region or asset class, are better positioned to deliver stronger and more consistent long-term returns. No single manager outperforms across all markets, which is why combining the expertise of multiple providers is often a more effective way to build a resilient and efficient investment strategy.
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