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Fundsmith takes £100mn hit on tech investment

Fundsmith takes £100mn hit on tech investment

Fundsmith, the UK’s largest retail fund, managed by Terry Smith, is sitting on a loss of more than £100mn after the shares of a technology company, in which he had invested £700mnn earlier this year, collapsed.

Fundsmith’s factsheet, examined by FTAdviser, under the heading “significant changes made in the six months to June 30, 2022”, showed a new investment of £700mn in the shares of Adobe, a business which provides computer design software. 

The share price of that company fell by around 30 per cent in the immediate aftermath of Adobe announcing last week that it was purchasing rival technology firm Figma for $20bn. 

Adobe shares fell by as much as 30 per cent on the day the deal was announced, and remain 20 per cent down over the five days to 21 September. 

The shares had fallen consistently since June, so the holding was not worth the £700mn purchase price when Adobe’s acquisition was revealed.

But a fall of around 20 per cent in a week still likely represents a reduction in the value of the stake of more than £100mn.

The Adobe purchase was by far the biggest made by Fundsmith in the first half of the year, with the next biggest purchase being £500mn in size. 

That $20bn price, according to FTAdviser's sister publication the Financial Times, represents around twice the level at which Figma, which is not quoted on any stock exchange, was valued in 2021.

Since 2021, the valuations of many unquoted technology companies have fallen. The $20bn price represents a multiple of fifty times earnings. 

Fundsmith’s manager, Terry Smith, favours the growth style of investing, a factor which has contributed to the fund’s relative underperformance - down 14 per cent this year to date, compared with a 9 per cent loss for the IA Global sector in the same time period. 

The fund is now £22.8bn in size, having been £26bn in January 2022. 

Fundsmith declined to comment.

david.thorpe@ft.com