Fundsmith Emerging Equities Trust (FEET) has evolved from an emerging markets (EM) consumer-driven growth story since launch in 2014. Its strategy remains to own high-quality companies, but a number of changes in emphasis have been made. The managers have made the portfolio more focused by number of holdings (38 at end-September 2021) and the weighting in technology and healthcare has increased. The team stresses that the fund suits investors with a long-term time horizon, as the underlying strong portfolio fundamentals lead to it owning businesses with superior operating performance, regardless of short-term market momentum. A combination of the recent robust performance of FEET's holdings and a lengthy correction in China's equity market (where FEET at c 15% is underweight the benchmark at c 19pp) has resulted in a strengthening of the fund's absolute and relative performance.
EM has been a 'mixed bag' in terms of performance in the past few years, with big divergences between countries. The differentiated approach and the high Indian exposure (c 46%, overweight the benchmark by 34pp, which is an outcome rather than a policy amendment (made in 2021) have started to pay off, as performance has strengthened. The increased portfolio concentration of 25-40 stocks (from 35-55), following the investment policy amendment, allows the managers to focus on the highest conviction stocks, while managing risk prudently.
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