Investments  

Smith vows to steer clear of unquoted assets

Smith vows to steer clear of unquoted assets

Fund manager Terry Smith, who runs the £19.3bn Fundsmith Equity fund, has vowed to steer clear of unquoted assets in an effort to preempt liquidity concerns following the Woodford debacle.

Fund manager Neil Woodford was forced to suspend his £3.7bn Woodford Equity Income fund on June 3 after a period of sustained outflows made worse by the fund’s extensive exposure to illiquid and unquoted companies that had made it hard to raise the cash needed to meet investors' demands.

In his half-yearly report to investors in Fundsmith, Mr Smith vowed he would not be pushed into a similar situation.

He wrote: "Fund liquidity is a subject which has attracted a lot of attention recently and I thought I should offer some observations about our fund in an effort to answer any queries you might have.

"The Fundsmith Equity Fund never invests, nor will it ever invest, in unquoted companies. Nor does own any small or mid cap companies.

"The smallest companies from a market value perspective that the Fundsmith Equity Fund invests in are all members of the FTSE 100 Index and the average market capitalisation of our portfolio companies at the end of June was £116.3bn. 

"We have published a liquidity measure on our monthly factsheet since January 2012, as we have always regarded this as an important subject, and at the end of June it showed that we could liquidate 61 per cent of our Fund (c.£11bn) in seven days (based on trading 30 per cent of the trailing 20 day average volume)."

The report covered the six months to June 30, and was published at the start of September.

Fundsmith is the top performing fund in the IA Global sector over the past five years, returning 163 per cent in that time, compared with 63 per cent for the average fund in the sector in the same time period. 

Its largest holdings are cosmetics company Estee Lauder and financial software company Intuit. 

Mr Woodford meanwhile has raised about £1bn from selling assets since the fund closed, and he expects to open the fund again in December 2019. 

david.thorpe@ft.com