Fundsmith launching sustainable equity fund after charity success

[November 01, 2017]  By Simon Jessop

LONDON (Reuters) - Fundsmith, the asset management company run by British stock-picker Terry Smith, said on Wednesday it was launching a fund to tap growing demand from institutional clients in sustainable investment.

The fund is the third to be launched since Smith set up the company in 2010, following a 36-year career which included a stint as chief executive of interdealer broker Tullet Prebon.

The move into sustainable investing for Fundsmith, which currently manages 13.5 billion pounds ($17.84 billion), follows growing demand from institutions such as pension schemes and insurance companies to focus on the sustainability of returns.

As well as more common exclusions such as pornography and tobacco, the Fundsmith Sustainable Equity Fund (FSEF) will also avoid investing in aerospace, defense, brewers, casinos, gas and electric utilities, metals and mining, oil and gas, it said.

While increasing numbers of funds are being launched aiming to pick stocks based on environmental, social and governance-related characteristics, Fundsmith said it will also look at policies and practice on research and development, product innovation, dividend policy and capital investment plans.

"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," Smith said.

"By marrying important sector exclusions with the proven sustainable investment process of Fundsmith we have shown that we can deliver superior investment performance."

The launch of the fund follows three years in which the company used the same process to run money for British charity Comic Relief, during which it returned an annualized performance 23.9 percent, it said in a statement.

The fund will be open to institutional investors with a minimum investment of 5 million pounds ($6.61 million) and carry an annual management fee of 0.9 percent. Smith and partners will invest more than 10 million pounds into the fund, it said.

The company launched its flagship Fundsmith Equity Fund in 2010 with 25 million pounds in seed money. It has since grown to total 11.9 billion pounds in assets, much of invested on behalf of retail investors.

(Reporting by Simon Jessop; editing by Jason Neely)

[© 2017 Thomson Reuters. All rights reserved.]

Copyright 2017 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.