Star fund manager Terry Smith takes £5m pay cut

Star fund manager Terry Smith has taken a £5m pay cut after his eponymous investment firm Fundsmith suffered a slump in profits.

Mr Smith, one of the City’s best known stockpickers, took home £23.3m for the year ending March 2025, down from £27.9m in the prior year, according to accounts filed at Companies House.

This is the lowest amount since 2018 and marks the third year in a row when Mr Smith has seen his payout drop. Profits fell to £39.6m from £46.4m for the period.

Fundsmith – which owns shares in companies likes Alphabet, Microsoft and Meta – was founded by Mr Smith in 2010 when the cult of dividend hungry star fund managers like Neil Woodford was reaching its peak.

The company initially lured billions from an army of loyal retail investors. But in recent years savers have pulled money because of performance concerns.

Fundsmith has trailed markets for four years in a row – leading to questions over Mr Smith’s stockpicking skills. Funds under management at the group have also fallen from over £30bn just a few years ago to £17.5bn today.

Like Warren Buffett, Mr Smith started Fundsmith with the aim of buying and holding shares in a small number of large, well established companies.

While some fund managers own hundreds of stocks, Mr Smith initially picked just 22 of the world’s largest businesses – including Unilever, Pepsi, Microsoft and Imperial Tobacco Group.

However, this strategy has started to falter recently because of the surging valuations of the “magnificent seven” tech giants.

b’

‘

While Mr Smith owns some of the magnificent seven, it left Fundsmith lagging behind the tech-driven rally that has seen stock markets surge since the start of 2023 on excitement around artificial intelligence.

More recently, Fundsmith has been targeted by activist investor Saba Capital, which is led by New York fund manager Boaz Weinstein.

The attack saw Saba push for an overhaul of Fundsmith and other British funds whose performances were described by Mr Weinstein as ranging from “underwhelming” to “disastrous”.

Mr Weinstein’s initial campaign was largely unsuccessful because of a shareholder backlash. However, Saba has subsequently built an even larger stake in Fundsmith’s Smithson Investment Trust, which invests in small and mid-sized companies.

Mr Smith now lives on the tropical island of Mauritius in the Indian Ocean, where he is currently building a museum for his classic car collection.

Try full access to The Telegraph free today. Unlock their award-winning website and essential news app, plus useful tools and expert guides for your money, health and holidays.