Terry Smith: I'm not used to being ignored

Terry Smith, chief executive, Fundsmith

Running a £20bn fund doesn’t guarantee good treatment from the companies you invest in, as Terry Smith, the manager of the Fundsmith Equity Fund, has found. When Amadeus, the Spanish company that provides booking software for airlines and other travel providers, raised €1.5bn to help see it through the coronavirus crisis by issuing new shares and convertible bonds at the start of April, Fundsmith wasn’t asked to take part in the fundraising, Smith tells Sky News.

Small investors are used to their pre-emption rights – the principle that existing shareholders should have first refusal when companies issue new shares – being ignored. But most people would have expected a fund as large as Fundsmith to be included: it’s Amadeus’s fifth-largest shareholder and has been invested for seven years, says Smith. But “they never even bothered to call us and neither did anyone acting for them”. Fundsmith is now re-evaluating whether to keep the stock, he suggested. “When they make bad decisions of that sort, it undermines our confidence in them.”

However, the crisis has created other opportunities for Smith, who invested in sportswear giant Nike and coffee chain Starbucks after the two firms had seen their shares fall almost 40%. “They are both good businesses that we have long wanted to own and we thought we had an opportunity there.” He also sold Clorox, which makes cleaning products, having bought it just four months ago, after its share price rose by almost 30% in the first four months of the year.