Terry Smith (businessman)

Terence "Terry" Smith, MNZM (born in 1953, London, England) is the founder and chief executive of Fundsmith and a notable British fund manager. He was formerly the chief executive of Tullett Prebon and Collins Stewart. He is a bestselling author and a regular media commentator on investment issues.

He has been referred to as "the English Warren Buffett" for his style of growth investing, which involves buying and holding shares in a relatively small number of established companies.^[1]

Smith was made a Member of the New Zealand Order of Merit in 2012, after his work in recognising the contribution of Sir Keith Park during the Battle of Britain. In 2016, Smith received an Honorary Fellowship from Cardiff University.^[2]

Early life

Smith grew up in East London where he attended Stratford Grammar School before reading history at University College Cardiff in 1974, graduating with a First.^[3] He turned down an offer of research fellowship to pursue a career in business.

Early career

Smith worked for Barclays Bank from 1973 to 1984. He managed the Pall Mall branch before transferring to the firm's finance department, where he developed an interest in stock analysis. He obtained an MBA from Henley Management College in 1979.

He left Barclays to work at W Greenwell & Co as a research analyst. Later he joined Barclays de Zoete Wedd where he was a number-one rated banking analyst, earning notoriety for writing a sell note on Barclays itself.^[4]

In 1990 he was appointed Head of UK Company Research at UBS Phillips & Drew, a position from which he was dismissed in 1992 following the publication of his best-selling book Accounting for Growth.

Accounting for Growth

In 1990 a series of high-profile FTSE 100 public companies went bust, including Polly Peck and British and Commonwealth. Smith's clients wanted to know why these firms had failed despite posting apparently healthy profits. In response, Smith wrote an analysts circular showing that these firms had run into difficulties with cash flow, rather than profitability, and in some cases had used deliberately misleading accounting techniques.

Smith's paper examined 12 of these techniques; the paper's title, Accounting for Growth, was intended as a pun. The paper was well-received and led to a book publishing contract with Random House. UBS asked Smith to withdraw the book.^[5] Both Smith and Random House refused. UBS suspended Smith before firing and suing him. Smith counter-sued; the two parties settled out of court 18 months later.^[6]

The controversy helped propel the book to the top of the bestsellers chart, displacing Stephen Hawking's A Brief History of Time from the no.1 spot and eventually selling over 100,000 copies.

Collins Stewart and Tullett Prebon

Smith joined Collins Stewart in 1992, shortly after being fired from UBS. He became a director in 1996; in 2000 he became Chief Executive after leading a management buy-out. The company floated on the London Stock Exchange in the same year. In 2003, Collins Stewart acquired Tullett Liberty, and then in 2004 acquired Prebon Group, creating Tullett Prebon, the world’s second largest inter-dealer broker.

Collins Stewart and Tullett Prebon were demerged in December 2006. Smith served as chairman of the demerged Collins Stewart entity from 2006-2010. In September 2014, Smith announced his retirement as director and deputy chairman of Tullett Prebon in order to concentrate on Fundsmith.^[7]

During Smith's tenure as Chief Executive of Tullett Prebon, he produced some £2 billion in shareholder value.

Fundsmith

In 2010 Smith set up a new business, Fundsmith, a fund management company headquartered in London. The business has one strategy, which it applies across the Fundsmith Equity Fund and Fundsmith Emerging Equities Trust. Fundsmith was set up to be the main vehicle for Smith’s investments; he now has over £60m invested in the fund. As of May 2017, Fundsmith manages over £10bn.

Smith is a noted critic of the established fee structure of investment management firms, claiming that most managers churn their stocks too many times, and that retail investors often lose the bulk of gains to excessive management fees and expenses. In 2014 he said: "Last year we spent £98,000 on dealing on a £3.5 billion fund, meaning total dealing costs were 0.005%. The FCA statistics suggest the average fund manager in the UK spends 1-1.5% on dealing. It’s a big drag on performance.” Writing in the Financial Times, Smith has used a Tour de France analogy to explain his long-term investment philosophy. He states that it is pointless to search for a fund manager who can perform well in all market conditions, likening them to cyclists in the Tour, which “has never been won by a rider who won every stage, and it never will. Like the Tour, investment is a test of endurance, and the winner will be the investor who finds a good strategy or fund and sticks with it.”^[8]

Other Interests

Smith is a frequent media contributor, and has written for a number of outlets, including a regular column for the Financial Times. Until 2013 he kept a blog, Terry Smith Straight Talking, writing extensively on financial and political issues. Smith is a Eurosceptic and advocated for Britain to leave the EU.

Smith studied history and remains interested in the subject, particularly military history. In 2008, Smith initiated then led and was chairman of the Sir Keith Park Memorial Campaign that erected a statue of Sir Keith Park on the Fourth plinth in Trafalgar Square, in recognition of his work as commander of No. 11 Group during the Battle of Britain.^[9][10][11] A permanent statue was subsequently erected in Waterloo Place, London, and was unveiled on 15 September 2010 – the 70th anniversary of the Battle.

In recognition of Smith’s efforts, he was appointed a Member of the New Zealand Order of Merit "for services to New Zealand-United Kingdom relations" in the New Zealand 2012 New Year’s Honours List.^[12]

In 2016, Cardiff University awarded Smith, an alumnus of the university, an Honorary Fellowship.

Debrett's People of Today lists Smith's interests as boxing, shooting and flying. He is also a competitive cyclist and an exponent of Muay Thai.^[13]

References

Notes

External links

• Terry Smith Straight Talking blog