Is Active Management Worth Paying For? With Terry Smith (CEO, CIO & Founder of Fundsmith)
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Published 2024-01-25
He’s been head of research, CEO of a public company, a former top banks analyst who won’t own a bank in his fund, and a highly respected and extremely successful founder and CIO at the Global Equity Fund Manager, Fundsmith.
Terry details his progress through finance, his growing attention to combine accounts, examining inconsistencies and checking the cash flows. He explains why he believes you cannot be successful in investing unless you break out from the crowd.
He then describes the genesis of Fundsmith, its mission “to run the best fund ever; by which we mean the one with the highest return over the long term adjusted for risk.” Unambiguous and Ambitious!
He details what, how, and why he looks for in the companies he selects, red lines, distrusting management gloss and why equities beat stocks over the long term. Lots to learn!
TOPICS:
0:00 - Introduction
2:25 - Early Analyst Career (1970s/1980s)
4:49 - 'Accounting for Growth' Publication (1990s)
8:49 - Developing the Fundsmith Investment Philosophy
9:42 - Transitioning from an Analyst to a CEO of a PLC
12:10 - Overview of Fundsmith in 2023/24
15:00 - Defining a Good Company
22:40 - Going From Good Analysis to Smart Investing
26:30 - Case Study: PayPal Inc
30:10 - Case Study: Tesco PLC
32:22 - Why Terry is Sceptical of Bank Stocks
34:31 - Research Standards & Management Gloss
39:05 - Short Thoughts on Shorts
40:57 - Unconventional Approaches to Macro
44:10 - Future of Fundsmith
45:47 - Why Invest in an Active Fund?
50:23 - Military History: Terry's Side Hustle
52:51 - Career Advice for Viewers
56:40 - Conclusion
SPONSORS:
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- IFM Investors are a global institutional asset manager whose purpose is to invest, protect and grow the long term retirement savings of working people. They manage investments across infrastructure, debt, listed equities and private equity assets. Find out more: ifminvestors.com/en-gb/
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All content on the Money Maze Podcast is for your general information and use only and is not intended to address your particular requirements. In particular, the content does not constitute any form of advice, recommendation, representation, endorsement or arrangement and is not intended to be relied upon by users in making (or refraining from making) any specific investment or other decisions. Guests and presenters may have positions in any of the investments discusse
All Comments (21)
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I have been a Fundsmith investor from the outset and have never regretted it. Now retiring as I approach my 70th year I will look to start to withdraw to supplement my Pensions and Capital Expenditure. Despite continuous research over the years I have never come across any Active Fund Manager who meets my needs as much as Terry and his team. The one thing go get with FS is no BS - if its bad - its bad and if its good - its good. All investors should remind themselves on a daily basis - there is only ONE guaranteed certainty - Markets will rise and fall BUT not necessarily in that order!
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Terry is an encyclopaedia. He is just an amazing orator and someone who has always an amazing story to tell.
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I don't invest in any active management funds or fundsmith however the knowledge Terry has is immenseful and i learn a lot from listening to him , thank you both for this interview
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Fantastic discussion. Great questions and equally great exposition from Terry Smith.
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According to the Hargreaves and Lansdown website the cumulative performance of Fundsmith is 60% over the past 5 years. The 5 year cumulative performance of the Legal & General Global 100 Index Trust is 111%. Why would you pay Terry Smith 1% to underperform the index which only costs 0.09%??
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Excellent interview, really enjoyed this 👏🏻👏🏻 - thank you both!
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Thanks. Thanks to Terry and thanks for posting this. Enjoyed watching this. Saw the big dip in Adyen too ;)
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Very very good. Thank you both
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Its always good to hear Terry's thoughts. Great interview.
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Exceptional interview. As always, Mr Smith is lucid, immensely knowledgeable, open and honest and totally free from meaningless waffle. I feel good that his team look after my investment.
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Absolutely first class, very enjoyable.
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This was a terriffic interview! Terry shared a lot of important concepts that every investor can use to improve their results.Thank you both.
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This was a treat to listen to ❤. Wish I could get a hold of his Accounting related book.
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Just finished Masters of the air today. It was very good!
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I listened to this whilst doing my shopping so may have missed it, did he answer the question "Is Active Management Worth Paying For?" I've tried searching through the transcript.
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Success doesn't come through imitation - Henry Ford
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Thanks, good one.
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Great interview! Hopefully Terry will come back soon! /G
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Great video
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nice podcast :) thanks
