Fundsmith launches Sustainable Equity Fund
Fundsmith LLP is pleased to announce the launch of a new institutional fund, the Fundsmith Sustainable Equity Fund (FSEF), on 1st November 2017.
Fundsmith has always sought to invest in sustainable businesses that can be held for the long term. The FSEF will follow the same strategy as the highly successful Fundsmith Equity Fund but with an important difference, namely the following sectoral exclusions that are stipulated in the fund prospectus:
• No Aerospace and Defence
• No Brewers, Distillers and Vintners
• No Casinos and Gaming
• No Gas and Electric Utilities
• No Metals and Mining
• No Oil, Gas and Consumable Fuels
• No Pornography
• No Tobacco
In addition, Fundsmith screens investments for sustainability in the widest sense, taking account of not only the companies’ handling of environmental, social and governance policies and practices but also their policies and practices on research and development, new product innovation, dividend policy and the adequacy of capital investment.
For the last three years, Fundsmith has been running a sustainable equity segregated mandate for Comic Relief the portfolio of which will form the basis for FSEF. This portfolio has compounded in value by 23.9% p.a.1, almost the same as the Fundsmith Equity Fund over the same period.
Performance Table
|
| 2017 Year to 29.9 | 2016 | 2015 | 2014^ | Inception to 29.9.17^ | Annualised from inception to 29.9.17^ |
| Comic Relief Portfolio1 | 18.2 | 29.8 | 11.4 | 10.9 | 89.4 | 23.9 |
| Fundsmith Equity Fund2 | 13.4 | 28.2 | 15.7 | 13.2 | 90.8 | 24.1 |
| FTSE Environmental Tech 1003 | 17.1 | 20.7 | 4.4 | 3.0 | 52.0 | 15.1 |
| Equities4 | 6.8 | 28.2 | 4.9 | 4.8 | 50.6 | 14.7 |
| Bonds5 | 0.2 | 6.5 | 1.0 | 4.3 | 12.3 | 4.0 |
| Cash6 | 0.2 | 0.5 | 0.6 | 0.1 | 1.5 | 0.5 |
1 Simulated return: Total return ex cash, dividends reinvested pari passu, net of fees. Launch date 6.10.14.2 Net of Fees priced at midday UK time. I Class Acc shares.3 Largest 100 pure play environmental technology companies globally. 4 MSCI World Index (£ Net) priced at close of business US time
5 Bloomberg/Barclays Bond Indices UK Govt 5-10 yr. 6 Three Month £ LIBOR Interest Rate. ^ Inception 6th October 2014.
Terry Smith, Fundsmith’s founder, chief executive and chief investment officer (CIO), and other members of the Fundsmith team will invest over £10 million into the new fund.
Terry Smith, Chief Executive and CIO of Fundsmith, commented:
“We have long felt that many investors who apply the commonly used factors to identify sustainable investments do so at the expense of the long term economic sustainability of a business. By marrying important sector exclusions with the proven sustainable investment process of Fundsmith we have shown that we can deliver superior investment performance. I believe Fundsmith Sustainable Equity Fund will provide a product that institutional investors both need and want.”
How has the Comic Relief Segregated Account fared compared with the ethical and sustainable funds?
| Annualised return % IA Global Funds with Ethical & Sustainable Mandates 06.10.14 - 29.09.17 | |
| Fundsmith Comic Relief Segregated Mandate1 | 23.9 |
| Pictet Global Environmental Opportunities | 18.0 |
| Stewart Investors Worldwide Sustainability | 17.1 |
| F&C Responsible Global Equity | 16.8 |
| Pictet Water | 16.0 |
| Hermes Global Equity | 15.6 |
| Henderson Global Care Growth | 15.2 |
| FP WHEB Sustainability | 14.8 |
| Old Mutual Ethical | 14.7 |
| Liontrust Sustainable Future Global Growth | 14.6 |
| Vanguard SRI Global Stock | 14.2 |
| Jupiter Ecology | 14.0 |
| Jupiter Global Ecology Growth | 13.5 |
| Sarasin Responsible Global Equity | 12.9 |
| Candriam SRI Equity World | 11.1 |
| GS Global Equity Partners ESG Portfolio | 10.9 |
| Halifax Ethical | 10.7 |
| Pictet Clean Energy | 9.6 |
| EdenTree Amity International* | 9.5 |
Source: Financial Express Analytics, Main Units. Total Return in Sterling. *Only Income shares available
1 Simulated return: Total return ex cash, dividends reinvested pari passu, net of fees
Notes to Editors
FUND FACTS
LAUNCH DATE: 01 November 2017
MINIMUM INVESTMENT: £5 million
CHARGES:
No initial charge
No performance fee
No redemption fees
Annual Management Fee 0.9%
Estimated OCF 1.01%
UNITS: Income or Accumulation
Fundsmith Sustainable Equity Fund
www.fundsmith.green
FSEF will invest in equities on a global basis. FSEF’s approach is to be a long-term investor in its chosen stocks. It will not adopt short-term trading strategies. It has been established as a UCITS scheme and complies with the requirements of the UCITS Directive.
FSEF has stringent investment criteria which the Authorised Corporate Director (ACD), as investment manager, adheres to in selecting securities for the investment portfolio. These criteria aim to ensure that FSEF 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 FSEF to be attractive.
Investors should be aware that the application of these investment criteria limits the number of potential investments for FSEF’s portfolio. It is envisaged that the investment portfolio will be concentrated, generally comprising between 20 and 30 stocks.
FSEF will not invest in derivatives and will not hedge any currency exposure arising from within the operations of an investee business nor from the holding of an investment denominated in a currency other than sterling.
No Fees for Performance
No Up-Front Fees
No Nonsense
No Debt or Derivatives
No Shorting
No Market Timing
No Index Hugging
No Trading
No Hedging
Fundsmith has become a signatory to the United Nations’ Principles for Responsible Investment (‘PRI’). The UN Principles for Responsible Investment is a joint initiative of the UN Environment Programme Finance Initiative and the UN Global Compact with the aim of incorporating ESG issues into mainstream investment decision-making and ownership practices. The UN PRI is based on the premise that institutional investors and asset managers have a duty to act in the best long-term interests of their investors and therefore, need to give appropriate consideration to how environmental, social, and governance (ESG) issues can affect the performance of investment portfolios. By providing a framework for the integration of responsible business conduct into investment strategies, the PRI contributes to the promotion of ESG objectives within the financial sector.
The Six Principles for Responsible Investment:
1. We will incorporate ESG issues into investment analysis and decision-making processes
2. We will be active owners and incorporate ESG issues into our ownership policies and practices
3. We will seek appropriate disclosure on ESG issues by the entities in which we invest
4. We will promote acceptance and implementation of the principles within the investment industry
5. We will work together to enhance our effectiveness in implementing the principles
6. We will each report on our activities and progress towards implementing the principles
http://www.oecd.org/investment/mne/38783873.pdf
About Fundsmith
Fundsmith is focused on delivering superior investment performance at a reasonable cost. It was established to be different from its peers so as to achieve a different result in line with Sir John Templeton’s axiom that “If you want to have a better performance than the crowd, you must do things differently from the crowd.” The rigorous research process of Fundsmith is central to what we do. We apply exacting standards to potential investments to produce a portfolio of resilient businesses with excellent performance. Minimising the costs we incur on behalf of our customers in implementing our strategy also sits at the heart of our philosophy.
Fundsmith was established in 2010 by Terry Smith. The business is owned and controlled by its partners, who have worked closely together over many years, and is headquartered in London with an office in Connecticut, USA. It is structured to survive Terry Smith’s demise and continue with the same investment philosophy. All partners of the firm have a significant co-investment in our Funds delivering a clear alignment of interest. Ancillary activities are outsourced to some of the world's leading providers in order to deliver high quality operations whilst allowing the Fundsmith team to focus on the investment analysis and portfolio management and customer care.
Disclaimer: For professional investors only. The past performance shown prior to November 2017 is based on simulated returns of a more concentrated segregated account run for a single client adjusted to show total return, ex cash with dividends reinvested pari passu. Simulated past performance is not a reliable indicator of future performance, in particular the segregated account was more concentrated than will be permissible for the Fundsmith Sustainable Equity Fund. The value of investment and the income from them can fall as well as rise. You may not get back the amount originally invested. This document has been issued and approved by Fundsmith LLP which is authorised and regulated by the Financial Conduct Authority.