Terry Smith has argued his flagship Fundsmith Equity fund could manage £30bn without hitting performance thanks to the market capitalisation of the companies he invests in.
Smith was questioned about capacity in the £19.7bn fund, which tops Oeic tables for size, in an investor call this month.
“I don’t know an exact answer,” he said, but added capacity would be “an awful lot bigger” than the current size.
The average size of the 28 companies in the portfolio is £114bn meaning a 1% stake in each holding would create a £30bn fund, he said.
Fundsmith’s largest holding is Microsoft, which has a market cap of $1.3trn (£1trn). Paypal and Philip Morris, which round out the top-three holdings, are $137.4bn (£105.3bn) and £134bn respectively.
US condiment business McCormick & Co and Spanish IT company Amadeus are the top-10 holdings with the smallest market caps at $23bn (£17.6bn) and €32bn (£27.0bn) respectively.
Alongside the Oeic fund, a Sicav created ahead of Brexit holds €4.5bn (£3.8bn), according to Trustnet.
Smith described Sage and IHG, both FTSE 100 constituents with market caps around £8bn, among the “bottom end of what we can do”.
“I think all of us that are based in the UK can sometimes have, unsurprisingly, a bit of a UK centric bias in terms of our thinking,” he said.
“Actually the size of our fund in relation to the world at large out there of investment is not that great. It does sound like a sum of money, but we could get the entirety of our fund into a number of companies that we invest in without even having a declarable stake.”
Morgan Stanley Global Brands is the second-largest fund in the Investment Association Global sector after Fundsmith Equity with £12.8bn assets under management, according to FE Fundinfo. It is followed by Nick Train’s £8.5bn Lindsell Train Global Equity fund and the £8.4bn Vanguard Global Stock Index fund.
DWS Top Dividende is the largest FCA-recognised offshore global fund with £17.5bn, according to FE Fundinfo.
