Fundsmith Emerging Equities returned 12% in NAV terms over the course of 2016. This was well behind the return on the MSCI Emerging and Frontier Markets Index (measured on a net sterling adjusted basis) which returned 32.4%. Shareholders were also affected by a narrowing of the premium. Returns to shareholders were 10.5%. The Board has not declared or recommended a dividend this year. However, they are considering charging a proportion of expenses against capital and this could have the effect of freeing up income for distribution.
The investment manager attributes a large part of the underperformance to the portfolio’s Indian exposure. Indian “demonetisation” had a direct impact upon the portfolio. 35% of which was in Indian stocks at the time of the announcement.
FEET : Fundsmith Emerging caught by Indian demonetisation