In terms of investing in continental European stocks, Smith is very selective.“I’ve only got one French and one Spanish company, and they draw most of their revenues from outside Europe,” he says.“I virtually always only buy companiesthat are international andthat have at least the potential to become global.”Looking further afield, Smith isvery much a fan of corporate Americaand emerging markets, selectively.“The US is interesting and it is not necessarily wrong to say equities arenot cheap, and yet it is still a great place to invest. We look for the highest-quality US companies – for wantof a better term, the bond proxies.“Even if these companies are expensive at the moment we are looking to hold stocks over the long term. If you choose the right companies overthe long term, the rate of return will deliver for you even if they fall in the short term,” he says.
Smith has put his money wherehis mouth is in terms of believing in emerging markets, launching the Fundsmith Emerging Equites Trust in June last year.“I like emerging markets. The growth rate is around three times that of developed markets as they industrialise and develop. People were asking us if you believe in them, why don’t you own them in your main fund? The answer was liquidity.“
The stocks are much smaller thanthe stocks we buy for the fund. They also don’t often have full, free float, with parent companies or families owning large positions, so they don’t suit an open-ended fund like the one we have. Launching the separate investment trust was the answer.”With so much achieved over four decades, what does the future hold for Smith? “I don’t think I will run apublic company again. I think Fundsmith will be my focus for the rest ofmy career,” he says.
While he has no particular plans to launch new funds, he hints it is on the radar. “I am not opposed to the idea at all. If we think of something that can offer superior risk-adjusted returns we can deliver, then we may well do it. We are open to ideas.” If Smith does launch a third Fundsmith offering, you would be brave to bet against it succeeding
