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Terry Smith bags £12m as Fundsmith sends £88m to Mauritius

Star fund manager Terry Smith in line for £12 million payout from record profits but Fundsmith’s payments to linked Mauritius company means that doesn’t tell the whole story.

Star fund manager Terry Smith’s Fundsmith business has enjoyed record profits as his giant Fundsmith Equity fund continues to hoover up assets.

Pre-tax profits hit £21 million in the 12 months to the end of March last year, with Smith entitled to £12 million of that, as his Fundsmith Equity fund grew from £10.3 billion to £13.4 billion and returned 7.3%.

Assets have swelled to £15.8 billion in the nine months since, with the top-performing global fund set to become the UK’s largest.

Profits were up from last year’s £14.2 million, but the growing payments from Fundsmith LLP, Smith’s UK-based company, to Fundsmith Investment Services Limited, based in Mauritius, means that doesn’t tell the whole story.

Since Fundsmith incorporated the Mauritian business in 2014, the flow of money from the UK to the island has steadily grown.

The £88 million payment for Fundsmith’s 2018 financial year is up from £57 million in 2017 and £29 million in 2016.

That figure is included under Fundsmith’s LLP administrative expenses and pays for the the investment management of Fundsmith’s funds, research, trading and administration. Fundsmith set up an office on the island in 2014 alongside the launch of its Fundsmith Emerging Equities (FEET) investment trust.

But with public accounts not available for the Mauritius company, it is not possible to see how much profit the company generates.

Smith changed his residence to Mauritius at the beginning of last year.

The Indian Ocean island offers a favourable tax regime, with no inheritance or capital gains tax and a maximum income tax rate of 15%.

Fundsmith’s Mauritius link means a like-for-like comparison with Woodford Investment Management, another fund management group controlled by its fund manager figurehead, Neil Woodford, is not possible.

Woodford’s firm also published its accounts this week, showing a pre-tax profit of £41.7 million over the same period covered by Fundsmith’s accounts, with Woodford entitled to a £23.7 million dividend.

That was despite a difficult year for Woodford, whose performance troubles contrast with Smith’s continued strong returns and the £822 million blockbuster launch of Smithson (SSON) investment trust, a global smaller companies fund.

Source: New Model Adviser