Smithson Equity: July 2026 update

• Simon Barnard hunts for quality small and medium-sized companies around the globe

• He uses the same investment process as other Fundsmith strategies - buy good companies and don’t overpay

• Smithson recently converted from an investment trust to this open-ended fund

• This fund does not feature on the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

Smithson Equity aims to grow your investment over the long term by investing in small and medium-sized companies. These companies have potential to outperform larger, more established businesses but they carry more risk. The manager invests in high-quality companies, mostly from developed markets.

In February 2026, the Smithson Investment Trust was converted into this open-ended fund. There was no change to the investment approach and the fund will be managed using the same process as the trust.

The fund could work well alongside ‘value’ funds investing in unloved companies or ones that focus on larger businesses. It could also be used to diversify an adventurous long-term investment portfolio focused on growth.

Manager

Simon Barnard joined Fundsmith in September 2017 and has managed Smithson since it launched in October 2018. After graduating from Cambridge University, Barnard joined Goldman Sachs Asset Management as a research analyst before moving into a fund management role in 2012.

Barnard is supported by three analysts, all dedicated to the Smithson Equity fund. Terry Smith, the founder of Fundsmith and manager of the flagship Fundsmith Equity fund, is also on hand to provide advice and support where required.

Process

Barnard and his team hunt for high-quality businesses which can efficiently make profits and dominate their market. They favour companies with intangible assets, such as brand power, intellectual property, or a product or service that customers can’t do without and would struggle to replace. Long-term sustainable growth is key, which is why the team seeks to avoid companies with lots of debt. The team also tends to invest less in more economically sensitive sectors, such as financials and utilities.

This approach is similar to the Fundsmith Equity fund. The main difference is the size of companies they invest in. Smithson invests in smaller businesses between £500m and £15bn in size. The average size is currently £5.5bn. The fund invests in 25-40 companies and currently invests in 31. This high-conviction approach means each holding can have a significant impact on performance, both positively and negatively, so it’s higher risk.

At the end of June 2026, the fund invested mostly in developed markets, with 48.9% in the US. Barnard also finds plenty of ideas in European countries such as the UK, Italy, and Germany. From a sector perspective, 32.4% of the fund invests in technology companies, with a further 24.8% in industrials. Healthcare and consumer companies also feature.

Barnard is mindful of share price valuations and only buys companies he feels are at a fair price. Once invested in a company, he’s happy to leave his investment to grow. As a long-term investor his ideal holding period is forever, so changes to the fund are made infrequently. That said, he may sell a company if he feels its share price no longer represents good value compared with its prospects or he finds a better idea elsewhere.

Recent changes to the fund include a new investment in US software business Fair Isaac Corp. Market concerns over the company’s future pricing power, which Barnard believes are unwarranted, meant shares were available at an attractive valuation. A new investment was also made in technology development company InterDigital.

Investments sold from the fund include Catalyst Pharmaceuticals and Recordati, both of which are subject to takeover discussions. Barnard also sold the fund’s investment in Swiss technology business Inficon.

Culture

Fundsmith is a boutique fund group with offices in London, Mauritius, and the US. It was founded by Terry Smith in 2010 with the launch of Fundsmith Equity. It’s since expanded to include a small range of funds and investment trusts, most of which are run along the same lines. The dedication to the founding investment philosophy is attractive.

The business is employee-owned, with Smith owning the largest stake, and managers all investing significantly in the funds. This means both the business and the funds are run with the long term in mind, and managers’ interests are aligned with investors.

ESG Integration

The team at Fundsmith aims to invest in high quality companies that are in control of their own destiny with the potential to generate a high return on capital. This generally discounts companies in areas like oil & gas production, mining, airlines, biotechnology, and banks, but the flagship Fundsmith Equity fund does not have any specific exclusions, and it does invest in tobacco.

Fundsmith offers a Sustainable fund, which excludes companies in the following areas: aerospace & defence, metals & mining, oil, gas and consumable fuels, tobacco, gas and electric utilities, brewers, distillers & vintners, and casinos & gaming companies.

In 2020, the firm formed a Stewardship & Sustainability Committee to centralise discussions around its stewardship and responsible investment-related policies, processes, and activities. While we feel Fundsmith has well thought out positions on many ESG topics, transparency on its ESG-related activities could be improved.

Cost

The fund has an ongoing annual fund charge of 0.98%. Our platform charge of up to 0.35% per year also applies, except in the HL Junior ISA where no platform fee applies.

Performance

During its time as an investment trust from October 2018 to January 2026, Smithson returned 54.33%*. Over the same period, its net asset value (NAV) grew 50.47%. These were behind the MSCI World SMID benchmark, which returned 91.33%, but ahead of peers that also invest in global smaller companies. Past performance isn’t a guide to the future.

The trust performed well from launch but struggled in 2022 as inflation concerns, rising interest rates, and growing economic uncertainty impacted the prospects of smaller companies.

Investments that performed well over this time include US cybersecurity business Fortinet, financial data provider MSCI, and New Zealand household appliance manufacturer Fisher & Paykel. UK conglomerate Halma, which focuses on safety and environmental equipment, also contributed to performance.

Detractors from the trust’s performance included drinks company Fevertree, technology platform Oddity, and Japanese e-commerce business Monotaro. The fund no longer invests in any of these companies.

As the fund invests using the same process as the Smithson investment trust, we expect it to perform in a similar way. Given the fund’s focus on quality, we would expect the fund to perform better than the benchmark when markets are weaker but not keep pace when markets rise quickly. Although this won’t always be the case. Since the Smithson fund launched in February, it’s returned 0.80% to the end of June 2026. This is behind the 5.69% growth of the benchmark but this is a very short period over which to assess performance.