Star stockpicker Terry Smith to close £325m emerging markets fund

Terry Smith shocked the investment industry by announcing plans to close its emerging markets fund.

The popular stock picker, who founded Fundsmith in 2010, is set to close the £325 million Fundsmith Emerging Equities Trust (FEET) as its performance fell short of expectations. The move stunned the city, with one analyst saying Smith had “fired” himself from a fund that continued to earn him healthy compensation.

Fundsmith currently manages four funds. The flagship Fundsmith Equity provides £23.5 billion in savings. But while an investor who put his savings in Fundsmith Equity in 2010 would now have six times his money, those in FEET aren’t so lucky.

Since the publicly traded trust was founded in 2014, it has returned 22.3 percent, lagging its benchmark, the MSCI Emerging & Frontier Markets Index, which is up 67.9 percent.

Smith, 69, from Mauritius, said: ‘We have always maintained that we would only run funds where we thought we had a particular advantage that would allow us to achieve superior risk-adjusted returns.

“While FEET has delivered positive returns since its launch in 2014, it has fallen below our expectations and, unlike other fund managers who may want to keep the fund for the sake of fee income, we believe it would be in the best interest from shareholders to recover their cash investment through portfolio liquidation and company liquidation.’

Several industry experts said the move was unprecedented in their memory.

Fundsmith currently manages four funds. Flagship Fundsmith Equity provides £23.5 billion in savings

Some have had to give up money from investors – Nelson Peltz, father-in-law of Brooklyn Beckham, was recently forced to close down Trian Investors 1 in London.

Neil Woodford’s empire collapsed after Link, who oversaw his operations, closed his Woodford Equity Income fund following poor performance.

Jason Hollands of investment platform Bestinvest: ‘It’s hard to think of an earlier example, especially in recent history, of a fund manager deciding to fire himself.’ Dzmitry Lipski, of Interactive Investor, praised Smith, saying it “could be much better to wind up an investment fund and return money to shareholders than to limp for years.

FEET owned few companies exposed to or based in China, but as the country is the world’s second largest economy, avoiding them has weighed on performance.

If shareholders repay liquidation, all assets are sold and the money is returned to investors.