Smith: My surprise at Fundsmith outperformance in 2012

Terry Smith, manager of the Fundsmith Equity fund, has shared his surprise at the outperformance of the portfolio in 2012, saying he did not expect the fund to do so well in markets that have been flooded with liquidity by central banks.

In an annual letter to investors, Smith said the fund rose by 12.5% last year, modestly outperforming its benchmark, the MSCI World index, which was up 11.4%. "I am rather surprised we managed to outperform the market at all in this reporting period," he said. "Major central banks in the developed world supplied increasing amounts of liquidity through their QE programmes in increasingly desperate attempts to keep some modest amount of economic growth. "All that liquidity has to go somewhere and indeed the supply of liquidity by central banks' purchases of bonds helps to push invest...