Fund star Terry Smith scoops £150m: Biggest payday yet for Mauritius-based stock picker as his firm rakes in record profits
Fund manager Terry Smith has bagged a bumper payday of up to £150million, making him one of the best-paid bosses in the global finance industry.
The Mauritius-based stock picker, who founded Fundsmith 11 years ago, celebrated record profits in the 12 months to March 2021.
Even though his flagship £22.7billion Fundsmith Equity fund underperformed the average of its rivals over the year, the firm raked in total profits of £57.7million – up from £48.5million a year earlier.
Mauritius-based stock picker Terry Smith (pictured), who founded Fundsmith 11 years ago, celebrated record profits in the 12 months to March 2021
Fundsmith was boosted by investors looking for somewhere to put the cash they saved during lockdown.
Over ten years, Smith’s flagship fund is one of the UK’s top money-spinners.
Ryan Hughes, head of investment research at AJ Bell, said the flows of cash into Fundsmith helped pull in strong profits.
He said: ‘While the size of those rewards may raise eyebrows, investors tend to be pretty sanguine about it while performance remains very strong and they feel they are sharing in the success.’
In the year to March 2021, Fundsmith Equity would have turned £1,000 into £1,318 – though this is less than the £1,451 made by the average fund in the Investment Association’s Global sector.
Since its launch in 2010, however, it has blown its rivals out of the water, turning £1,000 into £6,722 as opposed to the sector average of £3,543.
Hughes said: ‘I’m sure investors will still be satisfied with growth of over 20 per cent for the year.’
The biggest holdings in Fundsmith Equity include Microsoft, L’Oreal and Paypal. Smith also runs several other funds, including Sustainable Equity, and investment trusts Smithson and Emerging Equities.
Smith, 68, pocketed just over 60 per cent of the £57.7million profits generated by Fundsmith in the year. The rest was shared out among Fundsmith’s other owners.
But it also sent £188.1million in ‘fees’ to an opaque company in Mauritius, Fundsmith Investment Services Ltd (FISL) of which Smith is also the majority owner.
It does not make its accounts public, and a spokesman declined to comment on what the £188.1million was used for.
But Smith could have pocketed as much as 61 per cent, taking his total pay to £150.4million. It is understood that the sum is unlikely to be this high as some of the cash sent to FISL was spent on services such as research, administration and accounting.
Ben Yearsley, a director at Shore Financial Planning, said: ‘In one sense I have no issue with what Terry Smith gets paid. He’s built a very successful business. But I don’t like the secrecy around the Mauritius structure.’
Yearsley added that Fundsmith Equity was also relatively expensive in terms of the ‘ongoing charge’ which savers must pay.
Smith, the son of a London lorry driver, made his name in the 1980s as a banking analyst before lurching into controversy at broker BZW, urging investors to sell shares in its parent, Barclays.
In the 1990s, while working for Swiss investment bank UBS, he wrote a best-selling book on dirty accounting tricks used to make struggling firms look successful, for which UBS fired him.
The Brexit-backing father-of-two then took charge of stockbroker Collins Stewart, merging it to create Tullett Prebon. He went to the Indian Ocean island of Mauritius in 2014, to escape the City’s noise and grind.