By the end of the decade, the Fundsmith Equity fund had amassed £23 billion assets under management andTo put that into perspective, if an investor placed £10,000 into the Fundsmith Equity fund at launch, they would have just short of £54,000 this year.
The book was informed by Smith's time as analyst, but resulted in his dismissal from UBS for refusing to withdraw it. The dismissal didn't impact Smith's career too much, he later became chief executive of Tullet Prebon, one of the world's biggest money brokers. Throughout the book, Smith reiterates his 3-step core investment strategy that Fundsmith leverages, which is to invest in good companies, don't overpay and do nothing.
"We work hard," Smith said. "I think success is less about having great ideas and far more about good execution, and we work very hard every day at unglamorous tasks like analysing results, attending conferences, reading trade publications, and updating models." Insider breaks down the top 10 pieces of wisdom from Smith's new book to take into 2021 and outlines Smith's book recommendations for Insider readers.1. If you don't understand a company, don't invest
One example in the book was when Bloomberg published a story about a strike at Fresh Del Monte Produce Inc, which is an entirely different company from Del Monte Foods. However, the news story caused the share price to drop, creating an opportunity for Smith to buy into the company more cheaply. "We regard the greatest risk to our investors — after the obvious potential for us to buy the wrong shares, or to pay too much for shares in the right companies — as being reinvestment risk: we seek to buy companies which deliver high returns on capital in cash. What the management then does with these cash returns is one of the major factors affecting futures returns on the portfolio."Smith, from the outset of Fundsmith, wanted to have a fund that would be a reasonable cost.
"I am amazed by how much time and effort people waste trying to guess what will happen to known unknowns . Brexit, China, commodities, interest rates, oil price, quantitative easing, and the US presidential election are all known unknowns." At the start of the majority of Smith's annual shareholder letters, he reminds investors to think long-term about the returns of his funds.
And they offered 99% of their gain to charity, didn't they?
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