저자: TerrySmith관련논의,출연자는ValCipriani및사회자—자막상주출연자명확하지않음 · 외국인
요약 보기
Terry Smith(Fundsmith)가 반기 서한에서 퀄리티 전략에 모멘텀을 결합하는 방향으로 전략을 변경했다고 밝힘. 2022년 이후 성과 부진, 2025~2026년 특히 부진. 상반기 회전율 51%로 기존 바이앤홀드와 크게 다름. Visa 보유 후 Mastercard 매수, Sage(SGE) 재매수, TSMC 매수, AppLovin(APP, PER 60~70대) 신규 편입. 패시브 투자가 모멘텀을 과도하게 키웠다는 주장. 출연자들은 전략 변경이 성과 회복으로 이어질지 회의적. 다른 펀드(JP Morgan Growth & Income)도 유사하게 모멘텀 쪽으로 이동 중.
다듬은 글
We'll start with perhaps the most important event of the year in the world of investment funds . Terry Smith, known for Fundsmith, published his semi-annual letter earlier this month, in which he detailed a notable and unusual change in strategy. Our fund editor Val Cipriani is here to tell us more.
Val, I'm sure most of our listeners, or at least many of them, are familiar with Fundsmith Equity and Terry Smith, but for those who aren't, or who need a quick overview, can we first talk about the background to this change? So, what is Terry Smith known for in terms of his investment style ? How is he doing lately?
And then we'll move on to what exactly he changed and why. Yes, of course. So Terry Smith is probably the most famous fund manager in the UK. The reason is that until recent years his results have been very impressive indeed, and he invests, or rather invested, according to what is commonly called a " quality style," following three principles: buy what he considers to be good companies, don't overpay, and do nothing.
So it was a buy-and-hold strategy for the long term. By good companies, he means quality companies. That is, companies that have competitive advantages that are not easily replaced, that do not have large debts and generate quite a lot of cash. So his philosophy has always been that in the long run, such companies tend to outperform the market.
And if you choose the right company and hold the stock for years, you will make a lot of money and achieve better results than the market. The problem is that "quality" as a style in general is not performing very well, and Fundsmith in particular has been showing poor results since 2022, with last year and the current year being particularly unsuccessful so far.
So even Terry Smith's long-term returns, which have been quite strong for a long time, are, frankly, starting to look quite disappointing. That's why he decided to try to change his strategy. Yes, Terry Smith is known for his quality investment style , he looked for companies that dominate their niche and steadily grow capital, gradually generating profits; These are the stocks we talk about often on this program and write about a lot in the press because they are, or tend to be, reliable companies .
However, as you said, they have been supplanted to some extent by, for example, the AI mania of recent years. It's obvious that you've been making super profits from many of these AI companies. So Terry Smith's relative effectiveness suffered. Apparently, he decided to some extent that enough is enough, and if you can't beat them, join them.
So can we talk a little bit about what he does and how he adapts his strategy given this context. Yes. He says he wants to consider momentum strategy more. Momentum is another strategy that essentially involves slightly “riding” market waves. That is, attempts to buy companies whose prices are rising and sell those whose prices are falling.
And over the past couple of years, many fund managers have complained that momentum investing is dominating the markets compared to other styles and factors. Smith has said he wants to combine his quality strategy with elements of momentum , although it's not yet entirely clear how he intends to implement this.
But his main claim is that passive investing has provided a huge boost in momentum, and he seems to believe that in the long run it will crash or have very negative consequences for the markets. Meanwhile, he has made it clear that continuing with the previous strategy will mean capital outflows from the fund and, ultimately, the possible closure of the business, which may sound a bit premature for a fund with £12 billion in assets, but that is his view.
He also talked about abandoning a strategy he had used successfully in the past: buying quality companies that were experiencing what he called " technical failure." This is a tricky moment that makes the stock price fall and look cheap, and usually the idea was that it would recover and buying on the dip would yield a good profit.
Now he seems to think that this no longer works, as this momentum trend in the market tends to drive down the prices of struggling companies even further. Therefore, he declared that he would actually not do it again. Yes. I mean, that was or still is the principle of the traditional value investor , right?
Look for this value when you see a temporary problem in a company, and its qualities will eventually manifest. However, because momentum is such a powerful force right now, it's very hard to convince people to change their minds about something, and it's this momentum, more than the AI boom, that's what's driving it.
I know they are interconnected, which is what I just hinted at. Momentum is truly what changed everything. I mean, Terry Smith has been buying tech stocks for a long time. So we can't say that he was completely out of touch with this part of the market. It's more that some of these huge growth stocks that keep going up and up and seem overvalued to many are something he's perhaps paying a little more attention to.
He has already put this new strategy into practice, hasn't he? Because in the first half of the year covered by this letter, he made a lot of purchases and sales in accordance with this small adjustment to Fundsmith's principles. So it would be interesting to know a little more about exactly which companies he bought and sold in the first half of this year.
Yes. So, he made a pretty significant portfolio revision. Turnover was 51% for the first six months of the year. So this is a huge departure from his usual buy-and- hold strategy. And if you look at what companies he's been buying, it becomes a little difficult to understand exactly how his thinking has changed , because it's a mix of companies with different characteristics.
So you still have some classic quality assets if you want. For example, he already owned Visa, and now he bought Mastercard, and that's kind of how it is . These are companies that quality managers really like because they are effectively a duopoly, they generate a lot of cash, and they are relatively stable.
Because payments always happen, even if we have a recession, people still need to pay for something. And he bought Sage, which is obviously an accounting software that, for example, Nick Train, who is more UK-focused but is also a quality manager, really values. So, there are certain quality assets that are perhaps not so surprising, and there are other stocks that are a little more unexpected.
Um, I think the company that really caught my attention was Taiwan Semiconductor, just because it's a big bet on AI, and, you know, Asian semiconductors, uh, and chip stocks have done incredibly well over the last year or so , let's say . So, Smith said he's still committed to buying good companies and not overpaying, but he wants to take market dynamics into account to some extent.
That is, more trading, essentially more buying and selling. But when you start looking at some of the AI-focused stocks, you start to wonder about the valuation at which they're being bought and where we're headed next. So yes, in terms of new stocks, we've got a full list and we'll look at them in more detail in the magazine, but it's a somewhat motley mix of different types of companies.
Yes, the one that caught my eye was AppLovin, an American company that has been a very dynamic asset in recent years. It places pop-up ads in mobile games. I mean, she had a PE ratio. Its forward PE is slightly lower because growth is expected to continue, but the current PE is actually very high. He was in the 60-70 area, and it really doesn't look like the typical stocks he's bought before.
That said, there have been significant changes, but there are still many companies in the portfolio that are associated with Terry Smith, and some of them, as you mentioned in your article in print and online this week. Some of them perhaps highlight this somewhat awkward combination of two different investment styles and perhaps also contradict the idea that he will no longer buy falling assets, as he has repurchased Sage, a company that has recently suffered.
Yes. Yes. That's, uh, right. It's almost like us, yeah. We pointed this out in the magazine. It is also quite obvious that he is changing his strategy, but doing so somewhat reluctantly. So this is where some questions arise. For example, is he...is he confident? For example, does he have conviction in the changes he is implementing?
And yes, Sage was somewhat affected by the software stock sell-off earlier this year, and so it could be argued that this is not necessarily a company-specific problem. That is, the company itself did nothing critically wrong, it's just that the market believes that the entire sector as a whole will not be able to develop well in an era dominated by AI.
So, it's not exactly a one- company problem, but it begs the question of how he thinks about it , as many argue that software and related stocks are starting to look cheap. They are starting to look attractive, but they have n't actually recovered yet. So it's clear that the market as a whole is still waiting for confirmation that they will be able to continue making money as AI becomes more scalable and gains more features.
There is a big discussion going on about agent-based AI, that is, autonomous artificial intelligence capable of writing code for long periods of time and performing increasingly autonomous tasks, so it is unclear how all these companies will cope if such AI starts to be used everywhere. So, I guess time will tell.
But theoretically, this is a company that could potentially continue its decline. For those who are not aware, it is worth providing a few tickers. Sage, a British accounting software company, has the ticker SGE, and AppLovin is an American stock. The ticker there is, as you might have guessed, APP.
Of course, different companies are mentioned here , and this does not mean at all that they will all have difficulties; Perhaps this strategy will benefit and improve Fundsmith's results, which is what Terry Smith is actually aiming for. It is possible that the relative returns will be higher because he values momentum and takes into account the words of Citigroup's Chuck Prince, spoken in 2007-2008: while the music is playing, you should keep dancing.
Therefore, all this does not mean that performance will continue to be low. But we take a critical stance because it looks like a change in investment style , which is exactly what fund selection experts always warn about . They say, " Well, a certain style may be temporarily out of fashion." This is fine as long as the manager sticks to their job and continues to do what they do best.
The time to worry comes when they change strategy and try to catch up on profits. And there is certainly an element of that here, at least that's how it appears to some people. So it's interesting that you spoke to representatives of the fund sector for your piece to get their thoughts on these changes, and as I said, their views were somewhat mixed, I have to admit.
So, I guess you could say they were hesitating between " hold" and " sell." So no one said, "Yeah, now this looks great, let's buy the Smith Fund," but there's a whole spectrum of opinions. Some say, " If you've kept it this far, maybe it's worth seeing if it works, give it a little more time to see the results of the changes." Others are more critical and ask, in my opinion , a very valid question, because it is not only a change in style as such, but also the fact that he has changed his strategy to some extent.
Will he be as successful with a new strategy? After all, he built his reputation and all the success he accumulated in the early years of this fund's existence was possible because he was very skilled in his previous strategy. Even assuming he is right and this is an existential shift in the market, perhaps driven in part by passive investing (he is not the only one who believes this), the question arises: is he the person who can manage money under a new strategy, combining quality and momentum, if he has not done so before ?
They are very different, they are strategies that work differently, especially because he was a quality-oriented manager, but he took into account the assessment of value. Momentum is a strategy that does not pay much attention to valuation. They don't look at it very carefully there. He was very focused on minimizing trading, which means that what he is talking about now, by definition, involves trying to guess market timing, i.e.
buying and selling at the right moment. What track record do he and his team have in this matter? These are exactly the questions that more skeptical fund buyers ask, and I think they are perfectly valid questions. Yes, it's always tough, isn't it, when you have an underperforming fund and you still have it in your portfolio.
Of course, there is a temptation not to capture—I say “losses,” although the losses themselves were actually quite minimal—but to capture precisely the relative lag , that gap, the lost benefit of not holding something else. At the same time, when you see such changes, for some it may be a signal: "well, enough of me." Another interesting point for me: we don't yet know how these changes will affect the fund's return profile, we clearly see that it is trying to combine two different strategies.
Previously, you could be almost certain that if quality stocks performed poorly, then Terry Smith would perform poorly. It will be interesting to see if it will participate in the growth if quality stocks become popular again. How effective will this combination be if the market momentum continues. So it's quite difficult to determine the fund's position in the overall scheme of things, depending on what the markets have in store for the future.
So for someone like me, it's tempting to wait and see, to analyze this profile, but of course, when you've already invested money in a fund, time is not always on your side. Let's sum up, because it's time for us to move on. Let's briefly discuss the possibility of other funds doing similar things, as there are funds that try to combine these characteristics in a similar way to Terry Smith.
Yes. When Terry Smith's semi-annual letter came out , it struck me, because just a few months before that I had written about the trust, where the managers had expressed themselves in a similar vein, although differently, because Terry, of course, has his own special style, he writes about it quite bitingly.
But I've seen similar comments from the JP Morgan Growth and Income fund, which, you know, has a completely different success story, because it showed very, very good results until recently, and then had a difficult year in 2025. The managers said: “ We were a bit more inclined towards quality, although this is a fund with a much more flexible approach compared to Fundsmith.” But still, he had a certain inclination towards quality companies.
And late last year they said, " We're going to be more momentum-oriented now," which actually means, in part, selling assets when the investment thesis for stocks doesn't hold up. They said they would be willing to sell faster and rely less on a "wait and see" approach. So yeah, it's not just Fundsmith trying to do this.
There are several other funds that approach things in a similar way, and we are going to write about them . Indeed, this environment is challenging for many active managers. So we may see more people going down this path in the future, and yes, Vale, as you say, there will be an overview of some of the other options coming out online and in print in the coming days.
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