Five smaller rivals taking on Fundsmith – and winning

‘Although Mr Smith’s fund is excellent, it is reliant on a small number of very large stocks’

Britain’s biggest fund is also one of its most successful. Since its launch in 2010, Terry Smith’s £24bn Fundsmith Equity fund has made its investors 485pc, more than double the return of the global stock market.

But a number of smaller rivals are snapping at its heels and can claim to have beaten the returns of their betterknown rival over the past five years.

While Fundsmith Equity’s 141pc return over that period still comfortably beats the 103pc from the MSCI World index, a barometer for global stocks, 33 rival funds that invest in the global stock market have performed better.

They include some highlighted by experts as strong picks for investors to hold alongside Fundsmith, offering different strategies that can complement Mr Smith’s approach of holding a small number of large companies for a long period of time, with minimal trading.

Andrew Merricks of 8AM Global, an asset manager, said: “Although Fundsmith is exceptional, it is very dependent on a handful of shares continuing to do well. And, as it is so huge, it has no real option but to invest in certain very large stocks.”

T ROWE PRICE GLOBAL FOCUSED GROWTH EQUITY This £3.7bn fund has delivered double the returns of the global stock market over the past five years, making investors 212pc.

James Calder of City Asset Management said that although the fund’s name suggested a focus solely on growth companies, David Eiswert, the manager, was “pragmatic enough” also to seek out cheaper “value” stocks and not overpay for shares. This had helped to insulate the fund from losses as growth stocks have sold off this year on fears of a rise in inflation.

“When one looks at the holdings and the countries the fund invests in it has an obvious growth bias but it does not follow the pack. It is a fund for all seasons, almost,” he said.

ASI GLOBAL SMALLER COMPANIES Unlike Mr Smith, who typically invests in the biggest global companies, this £1.5bn fund focuses on smaller businesses that can grow to become household names.

Darius McDermott of Chelsea Financial Services, the fund shop, said: “The fund’s process is based on its powerful screening tool, ‘ Matrix’, which comanager Harry Nimmo helped create and which identifies promising smaller companies from all around the globe.”

Smaller firms tend to outperform larger companies over the long term and this system, which grades stocks according to multiple factors, has a proven record.

LIONTRUST SUSTAINABLE FUTURE GLOBAL GROWTH This £1.4bn ethical fund has delivered a 154pc return for investors over the past five years by focusing on companies with sustainable businesses and strong management.

Mr McDermott said Simon Clements, Peter Michaelis and Chris Foster, the managers, were seeking to profit from companies that exploited three “mega trends”: more efficient use of resources, improved health and an increased focus on safety.

They invest heavily in some of America’s biggest companies, such as Alphabet, owner of Google, and Charles Schwab, the broker.

RATHBONE GLOBAL OPPORTUNITIES James Thomson, manager of the £3.5bn Rathbone Global Opportunities fund, employs a similar approach to Mr Smith and holds a number of the same stocks, such as PayPal, the payments firm, and Estée Lauder, the cosmetics company.

Rory Maguire of Fundhouse, the research firm, said: “He is a proven growth investor and someone with a long track record of discovering businesses that grow their earnings and revenues at higher rates than the average company.”

The fund has made investors 150pc over the past five years.

L&G CYBER SECURITY UCITS ETF A small number of passive exchangetraded funds that replicate the performance of specialised markets have also delivered higher returns than Fundsmith Equity over the past five years.

Mr Merricks said this £1.9bn cyber security ETF was a strong choice, having returned 194pc over the past half- decade.

“Everyone needs more security online and the market will only get better as more people rely on webbased programs. This ETF has done tremendously well,” he said.