Is Fundsmith Equity still worth holding in a Stocks and Shares ISA or SIPP in 2026?

About two years ago, a friend of mine put a fair bit of his Self-Invested Personal Pension (SIPP) into the Fundsmith Equity fund. Itâs been a âdisasterâ, he told me recently.

Now, looking at performance figures, I can see his point. Relative to the broader market, it has been a very poor investment. So, is the fund still worth holding in 2026?

Negative returns

Zooming in on two-year performance, this fund really has been a stinker. According to Hargreaves Lansdown, over the last year (to 26 March), it has returned -8.6%.

The year before that, its return was about -2.7%. Put those yearly returns together, and weâre looking at a total return of about -11%.

It gets worse though. Fundsmith is quite an expensive fund â through Hargreaves Lansdown fees are 0.94% per year.

That wipes off another 2% or so. So, overall investors are down about 13%.

How have other assets performed?

Of course, a -13% return isnât the end of the world. An investor can recover from that pretty easily.

However, compared to the returns generated by some other assets, itâs very disappointing. Over the same period:

An All-World Index ETF is up about 23% (in GBP terms)
A FTSE 100 ETF is about 35%
Rolls-Royce shares are up about 170%
Nvidia shares are up about 85% (in USD terms)

Ultimately, investors could have generated much higher returns with other funds and/or stocks.

Multiple problems

Whatâs gone wrong? A lot of things.

For a start, fund manager Terry Smithâs âqualityâ style of investing hasnât been in favour. Investors have been focused on value shares and cyclical shares instead.

Secondly, Smith has missed big themes. Examples include the AI buildout and the defence spending supercycle.

Third, Smithâs stock selection has let him down. A lot of the shares in the portfolio have underperformed spectacularly â a major problem when you only own around 30 stocks.

Better options in 2026?

So, is this product worth holding on to? Well, it could be if an investor is seeking a quality-focused fund (I still like quality as an investment style) and/or a fund that doesnât behave like the broader market.

Iâll point out that the long-term track record is still very good. Between inception in 2010 and the end of February, it returned 13.5% per year.

However personally, I think there are better investments to consider in the market today. One fund I like more is the Vanguard FTSE All-World UCITS ETF (LSE: VWRP), which offers broad exposure to the global markets.

The advantage of this kind of index product is that it will automatically capture gains from companies that get dramatically bigger in size. For example, if Uber or Palantir were to become trillion-dollar companies, the ETF would capture their rises.

Another benefit is the low cost. Fees are just 0.19% meaning that itâs far more cost effective than Fundsmith.

On the downside, if major stock market indexes fall, this product is guaranteed to fall because itâs an index tracker (an actively-managed fund like Fundsmith could potentially generate a positive return).

Another disadvantage is that it’s heavily weighted to past winners. For example, Apple and Microsoft have huge weightings.

Overall though, I see it as a solid core holding and believe itâs worth considering.

The post Is Fundsmith Equity still worth holding in a Stocks and Shares ISA or SIPP in 2026? appeared first on The Motley Fool UK.

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Edward Sheldon has positions in Apple, Microsoft, Uber Technologies, Nvidia, Palantir, and the Vanguard FTSE All-World UCITS ETF. The Motley Fool UK has recommended Apple, Microsoft, Nvidia, Rolls-Royce Holdings, and Uber Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.