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The Fundsmith Equity fund has been a core holding in my Stocks and Shares ISA and pension accounts for a long time. And over the long term, it’s been a good investment for me.
Recently however, I decided to offload the fund and redeploy the capital into other investments. Here’s why I made this move.
Terrible performance in 2025
I’ve been concerned about the performance of this fund for a while now. That’s because it hasn’t kept up with the market in recent years.
Last year’s performance was the final straw for me. In a year in which pretty much every major index went up significantly (the MSCI World index returned 12.8%), this fund only returned 0.8%.
| 2025 | 2024 | 2023 | 2022 | |
| Fundsmith Equity | 0.8% | 8.9% | 12.4% | -13.8% |
| MSCI World | 12.8% | 20.8% | 16.8% | -7.8% |
What’s gone wrong? Well, one issue is that the fund hasn’t fully participated in the tech stock boom.
In his annual letter, fund manager Terry Smith highlighted the current market concentration in Magnificent Seven stocks as a risk. There’s a reason the market’s concentrated in these names however, and that’s because their earnings have soared in recent years.
2026 outlook
Now, I do like Smith’s ‘quality’ style of investing – it’s similar to my own. However, looking ahead, I’m unconvinced the fund has the potential to beat the market in 2026.
Here’s a look at the top 10 holdings in the fund at the start of the year versus the top 10 of the Vanguard FTSE All-World UCITS ETF (LSE: VWRP).
| Fundsmith Equity | Vanguard FTSE All-World UCITS ETF |
| Waters | Nvidia |
| Stryker | Apple |
| IDEXX | Microsoft |
| Visa | Amazon |
| Marriott | Alphabet Class A |
| L’Oreal | Broadcom |
| LVMH | Alphabet Class C |
| Unilever | Meta |
| Alphabet | Tesla |
| Automatic Data Processing | Taiwan Semiconductor |
Looking at Fundsmith’s top holdings, they’re not bad companies. In fact, they’re all world-class companies. However, right now, many are just as expensive as the Mag 7 tech stocks in the Vanguard fund. Waters, for example, trades on a price-to-earnings (P/E) ratio of about 28.
I’d expect the stocks in the Vanguard fund to generate more growth in the near term however. This year, Nvidia’s revenues are forecast to rise 54% versus 6% growth expected for Waters.
High fees
A third reason I’m bailing on Fundsmith is the fee structure. Ultimately, it’s too high given the lack of performance. Currently, annual fees through Hargreaves Lansdown are 0.94%, compared to 0.19% for the Vanguard fund above.
I don’t think Smith and his team are doing enough to justify the high fee. For that fee, I’d want to see better stock-picking ideas.
Where have I put the money?
As for where I’ve redeployed the capital, I’ve put it into two different tracker funds. One is the Vanguard fund mentioned above.
With this fund, I get exposure to over 3,600 different stocks for a very low fee. And the beauty is, winners can run and run (like Nvidia has in recent years).
The other fund I’ve gone with is the Legal & General Global 100 Index Trust. This is a low-cost tracker that provides exposure to the 100 largest companies in the world.
It’s worth noting that these funds also have their risks. If the Technology sector has a meltdown, these products are likely to underperform.
I’m bullish on technology however, so I’m comfortable with the risks (and believe the funds are worth considering).
I’ll point out that I may come back to Fundsmith at some point in the future. As I said, I like Smith’s quality approach. I just feel that right now, there are better investments.
