Edison reviews on Fundsmith Emerging Equities

London, UK, 18 November 2021

Edison reviews on Fundsmith Emerging Equities Trust (FEET)

Fundsmith Emerging Equities Trust (FEET) has evolved from an emerging markets (EM) consumer-driven growth story since launch in 2014. Its strategy remains to own high-quality companies, but a number of changes in emphasis have been made. The managers have made the portfolio more focused by number of holdings (38 at end-September 2021) and the weighting in technology and healthcare has increased. The team stresses that the fund suits investors with a long-term time horizon, as the underlying strong portfolio fundamentals lead to it owning businesses with superior operating performance, regardless of short-term market momentum. A combination of the recent robust performance of FEET's holdings and a lengthy correction in China's equity market (where FEET at c 15% is underweight the benchmark at c 19pp) has resulted in a strengthening of the fund's absolute and relative performance.

EM has been a 'mixed bag' in terms of performance in the past few years, with big divergences between countries. The differentiated approach and the high Indian exposure (c 46%, overweight the benchmark by 34pp, which is an outcome rather than a policy amendment (made in 2021) have started to pay off, as performance has strengthened. The increased portfolio concentration of 25-40 stocks (from 35-55), following the investment policy amendment, allows the managers to focus on the highest conviction stocks, while managing risk prudently.

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