Tuesday 15 October 2024 12:15 pm

Fundsmith Equity plummets down most bought list as passives dominate

By: Elliot Gulliver-Needham

Fundsmith Equity, the largest investment fund in the UK, fell 12 places down Interactive Investor’s most bought list in the third quarter of 2024, as passives cemented their majority on the list.

The £23.8bn fund, run by star fund manager Terry Smith, fell from eighth on the list to 20th, the biggest movement of any fund on the list.

“Long-term investors of the fund… will surely have no complaints as it has comfortably outperformed the wider global market and most global fund rivals since launch in November 2010,” said Kyle Caldwell, funds and investment education editor at Interactive Investor.

However, Fundsmith Equity has struggled to keep up with competitors in recent years, sitting firmly in the third quartile of global funds over the last one and three years thanks to subpar growth.

Performance over the last six months has been especially poor, with Fundsmith Equity returning just 0.2 per cent, compared to the global sector’s four per cent rise.

“Smith, like other professional investors, is facing into the headwind of global stock market returns being heavily influenced by a small number of US tech companies, the so-called Magnificent Seven: Microsoft, Amazon, Nvidia, Alphabet, Apple, Meta Platforms and Tesla,” Caldwell added.

To match that trend, the largest riser in the list was the Invesco EQQQ Nasdaq 100 ETF, rising 12 places from 23rd to 11th, with all the largest tech stocks represented in the fund.

In total, tech-focused funds accounted for nine of the top 50 funds – rising from seven in the quarter before.

Meanwhile, the list also saw the rising dominance of passing funds, with 30 passive funds in the top 50 versus 20 active funds. This has changed from a ratio of 26 to 24 just last quarter.

“Leveraged ETFs proved to be more popular, coinciding with higher levels of volatility over the summer for tech stocks, as well as the stock market as a whole,” added Caldwell.