Any opinion on what Terry Smith is doing? I really admire the guy, but this change surprised me quite a lot

So the new Fundsmith half-year letter dropped and honestly it caught me off guard. The fund's down 2.9% while MSCI World is up 11.2% — a 14-point gap in six months — and instead of the usual "sit tight, we're long-term," Smith actually went and changed the way he manages the thing. Coming from him, that's kind of a big deal.

You know the mantra: **buy good companies, don't overpay, do nothing.** Well, he's basically loosening the "do nothing" bit. Turnover jumped to \~52% in the half (crazy high for him), he says he'll pay more attention to momentum now, and — this is the part that got me — he's going to **stop buying quality names when they stumble.** That whole "buy the wonderful company when it hits a glitch" move he's famous for (his Microsoft-under-Ballmer buy, Buffett's salad-oil Amex)? He reckons it just gets you cut fingers these days, because passive flows pile on and drive the falling knife even lower.

His argument is that the market isn't really about fundamentals anymore, it's a passive/momentum feedback loop. Active guys are only \~10% of actual *trades* now (was 80% in the 90s), momentum's at a 30-year high, more stretched than late-1999. And here's the bit I actually found convincing: he runs an *open-ended* fund, so when people redeem he's forced to sell — he can't just wait out a five-year dislocation the way Buffett can with permanent capital. As he puts it, "the market can remain illogical longer than we can remain in business."

I don't think it's him losing the plot — feels more like a disciplined guy admitting the market's plumbing has genuinely changed and adapting instead of stubbornly going down with the ship.

But the other side nags at me too: he's raising turnover and buying AI-ish names (TSMC, AppLovin) right as he's warning the AI/passive bubble could unwind faster than 2008 did. Bit of a contradiction, no?

So yeah — pragmatic evolution, or a value purist blinking at the top? Would genuinely love to hear what people think, especially anyone who's held Fundsmith for years.

Letter's here if you want the full thing: [https://www.fundsmith.co.uk/media/lfhpxi1x/fundsmith-equity-fund-semi-annual-letter-to-shareholders-2026.pdf](https://www.fundsmith.co.uk/media/lfhpxi1x/fundsmith-equity-fund-semi-annual-letter-to-shareholders-2026.pdf)