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Old 09.12.2019, 12:02
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Re: Worst Case scenario for Fundsmith owners

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So plenty of us on here are strong advocates for investing in FS myself included. We're in deep & I often take the opportunity to illustrate the gains to my family vs. any other potential investment.

Recently I've been getting some reasonably cautious pushback in the form of "what if" questions.

What if FS goes bust (you get the jist of the pushback), what if Terry Smith dies, what if something happens that no one could have predicted? Black Swan event specific to FS & not the wider market. The questions are coming from a place far removed from an investing mindset but it got me thinking about: What am I not thinking about here? What are the risks of holding FS? What is the worst case scenario as a FS holder?

The exposure to the market is understood & that risk is assumed knowingly but what about FS itself - what are the risks, insurances if any & how to mitigate?

I assume many investors on here have taken a deeper dive into this topic than me & I'd love to hear your thoughts, particularly on unmitigated FS specific risks & their consequences.

Thanks Folks.
Terry Smith has also been thinking to what happens if he dies as he has well in excess of 300,000,000 in the fund. Julian Roberts head of research is responsible for the fund when Terry is not available such as on a plane. They have worked together for over 30 years. Should both Terry & Julian die at the same time, then Danial Washburn who has worked at FS since inception would be in charge. Daniel is now a partner in the management company so will not be looking for a job elsewhere.

Fundsmith management company has income exceeding 200,000,000 a years in fees, they are not paying that in salaries so won't go bankrupt.

Average share held in the portfolio has a market cap of 117 billion & 59% of the portfolio (about 11 billion) could be liquidated within 7 days so investors wanting their money back won't be an issue.

The partners have a lot of Skin in the game, more than 50 - 100 times that of Lindsay Train. Quite why both L & T have only got a few million in the fund each beats me, their fees from the 8 billion fund are huge.
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