In short: The subject, and the only argued view in the post. Launched 2010, "manages £12 billion and has achieved an impressive 13.1% CAGR after fees since inception" — but "Terry Smith has underperformed every single year over the past 5 years," and in the first half of 2026 "he turned over more than 50% of his portfolio." The letter concedes the change is defensive rather than analytical: "you can and increasingly have been taking money out… a buy and hold strategy can only work if you are not subject to flows, and we are… You should therefore expect that we will be more active in the future." The verdict: "I think the move Fundsmith made is strange. They are switching from quality to momentum right now. They might be making the switch at exactly the wrong time."
Fundsmith is the £12 billion fund run by Terry Smith, sometimes called the English Warren Buffett. Its entire method is three rules: buy excellent businesses, don't pay silly prices, and then do nothing — because trading costs money and interrupts compounding. Since 2010 that has produced 13.1% a year after fees.
The news is that Smith has abandoned the third rule. He turned over more than half the portfolio in six months and told investors to expect more trading, because he is now taking momentum into account. What makes it remarkable is his own explanation: he does not claim it is the better investment decision. He says that his investors have been withdrawing money to move into index funds, and that a buy-and-hold strategy only works if you are not being forced to sell to meet redemptions. In his words, there is no point being proved right after the fund has closed.
The judgement here is unsparing and it is about timing rather than character. Switching from quality to momentum after five years in which momentum has already won is, on this reading, selling the strategy at its low — "they might be making the switch at exactly the wrong time." It is also a warning about the structure of open-ended funds themselves: a manager whose capital can walk out at the worst moment does not fully control his own process, which is exactly the constraint a private investor does not have.
In short: Terry Smith's fund, cited as the source of the Novo Nordisk verdict at its annual shareholder meeting ("We bought it in 2016") and of the expected-return rule of thumb used here — earnings yield + EPS growth. Not a stance on the fund.
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Verbatim excerpts from the public transcripts (auto-pulled at each mention's timestamp, lightly cleaned). Timestamps link into the video; "source page" opens that commentator's full analysis at this row. Click a mention's header line to expand it (one open at a time). For personal study — not investment advice.