Fundsmith Equity raises £60m with likely 1.25% TER

Terry Smith has confirmed his new Fundsmith Equity fund’s total expense ratio (TER) is likely to be 1.25% this year after it raised £60m from investors.

Terry Smith
Terry Smith

The founder of Fundsmith and chief executive of Tullett Prebon, the inter-dealer broker, said the fund has raised most of the money from direct clients, rather than advisers, and had an additional £100m of interest from family offices.

Speaking at the Tullett Prebon International Boat Show on Sunday, Smith hinted there could eventually be some flexibility around the funds’ 1% annual management charge (AMC), all of which goes to the fund manager and none to platforms or advisers. (article continues below)

A fund manager’s typical cut of the AMC is currently just 0.75% of assets, although direct investors still have to pay a 1.5% charge to most managers even if they do not use an adviser or a platform.

Smith launched Fundsmith as a lower-cost operation for direct investors, complementing and competing against cheap passive portfolios such as exchange-traded funds.