Fundsmith: A Masterclass in Mediocrity in Pension Investing

The chart below tells the story better than any glossy marketing brochure. Over the five years from September 2020 to September 2025, the Fundsmith Equity Fund - once feted as the “go-to” active fund for long-term investors - has returned a cumulative 32.8%. That sounds respectable until you run the maths.

The Maths of Investing With FundSmith for Your Pension

Total return: +32.8%

 Period: 5 years

The compound annual growth rate (CAGR) is calculated as:

That’s the cold, hard fact.

Now, compare this with the benchmarks:

• MSCI World Index (GBP total return): ~13.0% annualised over the same period.

• FTSE All-Share (total return): ~11.5% annualised.

Fundsmith managed just 5.8%. Less than half what you would have achieved by simply buying a cheap global tracker.

The Problem with “Protecting Capital”

The defence from Fundsmith’s camp is always the same: risk-adjusted returns. The fund has historically boasted a higher Sortino ratio (0.87 vs MSCI World’s 0.60), meaning it has delivered more return per unit of “bad volatility”. In English: you suffer less when the market falls.

But here’s the rub. The world’s investors don’t live on ratios – they live on pounds, dollars and euros. And from 2020 to 2025, the opportunity cost of being in Fundsmith was enormous. A £100,000 investment grew to just £132,800. The same sum in MSCI World? Around £184,000. That’s a £51,000 gap in five years.

That is not “protecting capital” – it’s leaving money on the table.

Style Drift and Missed Upside

Fundsmith’s philosophy of buying quality companies at reasonable prices is sound. But style matters. In an era when global growth was led by US megacap tech, a refusal to own the winners meant consistent underperformance.

In 2024 alone, Fundsmith returned +8.9%, while MSCI World roared ahead with +20.8%. That isn’t downside protection. That’s missing the rally.

Why Investors Should Be Concerned

Fundsmith has always prided itself on beating the market since inception in 2010 - roughly +2.7% per year over MSCI World. But the past five years show that the halo is slipping. When markets are rising and other funds are compounding double-digit annual returns, a mid-single-digit return feels like mediocrity dressed up as prudence.

The danger is psychological. Investors read the brochures, hear the mantra “do nothing, own quality”, and assume they are safe. But safety, in this case, meant losing out on half the gains of a boring global index fund.

The Verdict

If you bought Fundsmith five years ago, you effectively paid active-fund fees to achieve half the return of passive investing. The maths is simple, the chart damning.

Fundsmith may still claim the moral high ground on “risk-adjusted returns”, but the reality is clear: for wealth creation, the strategy has been a disappointment.

If you want smooth sailing, create your own low volatility, high growth stock portfolio. If you want growth, buy the index with growth stocks. If you want neither, buy Fundsmith.

Sources:

• Fundsmith Equity Fund Factsheet

• Morningstar – Fundsmith Equity Fund

• Trustnet – Fundsmith Equity Fund Performance

• MSCI World Index (GBP, Total Return)

• FTSE All-Share Index Performance

• Vanguard MSCI World ETF Data

Disclaimer: This content is opinion based on the disclosed facts and sources above, including fund factsheets, benchmark data, and publicly available filings as at time of publication. An honest person could hold this opinion on those facts (Defamation Act 2013, s.3). I publish this in the public interest to inform UK savers about costs, risk, and performance of widely‑marketed products (s.4). This article is for educational purposes only and does not constitute investment advice. The data presented is sourced from publicly available information believed to be accurate as of September 2025, but no warranty is made regarding its completeness or reliability. Past performance is not a reliable indicator of future results. All investments carry risk, including the possible loss of capital. Investors should conduct their own research or consult a regulated financial adviser before making investment decisions.

Alpesh Patel OBE www.campaignforamillion.com