The chief executive of LGT Wealth Management has revealed the reasons his firm continues to have “a very significant investment” in Fundsmith, despite the fund suffering performance issues over the past year.
LGT is a discretionary fund manager which has £22bn assets under management and is backed by the Liechtenstein royal family.
Back in 2016, LGT acquired Vestra Wealth, the wealth management firm founded by Ben Snee and colleagues from UBS.
Snee stayed on as chief executive after the takeover and told FTAdviser that the core principle underpinning the fund selection has not changed, with a strong preference for actively managed funds and what he calls “quality growth” strategies.
This is a category of fund in which Terry Smith’s Fundsmith fits, and despite the fund having lost money over the past year, Snee said he retains faith in the fund manager.
Snee said: “We have invested with Terry for a long time. There is only one share class, we get the same one everyone else does, and we have a lot of money with him.
"Our view is that he has added a lot of value for our clients over a long period of time.
"We believe that fund selection is the primary driver of returns, no one can successfully time markets, and that is Terry’s view as well.
"That means there will always be periods when funds and portfolios are out of favour. When explaining that to direct clients and to advisers, the last thing we want is for a fund manager to change their approach, and Terry has made very clear he won’t be doing that.”
Some investors have raised concerns about the recent propensity for Smith to buy large technology companies, entities which may not always be classed as “quality growth".
But Snee said Smith addressed this in recent communication with clients when he said that companies such as Amazon, which use technology, should actually be viewed as consumer companies with large market shares.
Of the £22bn managed by LGT, £10bn is run via traditional risk weighted model portfolios, with the other £12bn run via bespoke models - that is portfolios created directly for individual clients, or on a discretionary basis.
The £22bn figure is a long way from the £100mn the firm launched with as Vestra in 2008.
Snee said: “We left UBS to launch Vestra and thought we would get to a billion or two quite quickly. But we were launching right in the teeth of the financial crisis and at one stage we had costs of £1mn a month, but income of £1mn a year.
"We got backing from Goldman Sachs and from some of our clients who became shareholders.
"In 2015 they wanted to exit and we were introduced to LGT."
Snee added: “More than half of our net inflows right now are from advisers. This is a major area of growth for us and I think we have one of the biggest business development teams out there.”
