Terry Smith enjoys £36mn payday as fund performance drops

Terry Smith enjoys £36mn payday as fund performance drops
Terry Smith, chief executive of Fundsmith, who was paid £36mn

Star fund manager Terry Smith was paid more than £36mn last year, despite his main fund underperforming the wider market.

Fundsmith, the fund company that runs Fundsmith Equity, posted profits of £58.4mn in the year to March 2022, a slight increase on the £57.8mn made a year before.

The company paid Terry Smith, its highest earner, £36.5mn in that period, according to accounts filed to Companies House.

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The £22.5bn Fundsmith Equity fund’s performance in the year to March 31 last year, for which Smith was paid £36.5mn, was a return of 8.9 per cent.

This beat the IA Global sector which returned 7.87 per cent, but underperformed the MSCI World Index which returned 14.43 per cent.

Overall in 2022 the fund lost 13.8 per cent, though its performance has improved recently.

The fund was particularly impacted by the tech sell-off at the start of 2022, losing 15 per cent in the first two months of the year with holdings in PayPal and Facebook-owner Meta particularly affected.

Fundsmith has since sold its PayPal shares, previously one of its top 10 holdings, alongside its holding in Intuit, a US-based tax software provider.

Both moves, enacted in December, are against Smith’s oft-repeated investment strategy which is to “buy good companies, don’t overpay, do nothing”.

Indeed over the past three months, performance has improved and Fundsmith Equity has started outperforming.

It has returned 3.2 per cent while the IA Global sector returned 1.5 per cent and the MSCI World index lost 0.3 per cent.

Other investment payments

Smith is also likely to have profited from the £252mn paid by Fundsmith LLP to Fundsmith Investment Services Limited, based in Mauritus.

The company was incorporated in 2014 and acts as the investment manager for the Fundsmith Equity fund.

In July last year, Smith said he was “not optimistic” and criticised central banks’ attempts to curb inflation with rate rises.