An £87m bonanza for fund star Terry Smith as Woodford faces backlash over £14m payday
Veteran investor Terry Smith has bagged a bumper payday of up to £87m
Veteran investor Terry Smith has bagged a bumper payday of up to £87million.
The Mauritius-based fund manager saw profits at his firm, Fundsmith, climb to £26.4million in the year to March 2019 from £21million the year before.
His two main funds generated stellar returns, pumping up the performance fee which Fundsmith received from savers, and attracting more investors.
The windfall for Smith, 66, means he is better-paid than any boss on the FTSE 100 index of Britain’s largest listed companies, and better rewarded than most of his rivals.
But his massive pay cheque emerged as Woodford Investment Management, the business founded by disgraced fund manager Neil Woodford, revealed it had paid its bosses £13.8million over the same 12 months after a run of dire performances.
Woodford himself, who has now lost control of all his funds after being sacked from some and resigning from the others, took home £9million, and his business partner Craig Newman bagged the other £4.8million.
While Smith’s flagship Fundsmith Equity fund turned a £1,000 investment into £1,226 in the 12 months to March 2019, Woodford’s Equity Income fund would have lost £57, to leave just £943.
The difference in performance between the two is even starker over a longer period.
Anyone who invested £1,000 when Woodford Equity Income launched in 2014 would now have £827. If they put the same amount into Fundsmith Equity that day, they would be sitting on £2,663.
Smith has achieved star status among many savers due to his reliable returns, and now manages £25.7billion of investors’ money.
Office location: Fundsmith paid another £115.8m to a Mauritius-registered company called Fundsmith Investment Services Limited
His customers ploughed £1.9billion more into the Fundsmith Equity fund than they drew out in the 12 months to March 2019, according to Morningstar data, and it became the UK’s largest fund last year after topping £18.6billion.
But his pay has drawn criticism. Luke Hildyard, director of the High Pay Centre, said: ‘The proportionality of the reward could be called into question.
‘The fees accruing to investment managers come from savers, so proper oversight of the profits that funds generate and the payouts they award to their executives is vital.’
Smith is entitled to around 61 per cent of the profits his business makes, while the rest is shared among his business partners. This meant he scooped £16.2million from Fundsmith’s £26.4million profits.
But Fundsmith paid another £115.8million to a Mauritius-registered company called Fundsmith Investment Services Limited (FISL), owned under the same structure as the UK firm.
Smith could have taken as much as 61 per cent of that too, giving him a total of up to £86.9million.
A spokesman said some of the FISL cash is spent on services such as research and administration, so it is not all shared by Smith and his partners. She declined to reveal how much was used to pay these expenses.
James Daley, managing director of Fairer Finance, said: ‘Up to £87million in a year feels like too much money for one individual, when their job is to make money for others.’