The 2025 stock market got off to a turbulent start. The once unwavering confidence in U.S. equities—particularly the Magnificent 7—is beginning to show cracks. At the same time, European and Chinese stock markets have surged out of the gate, a scenario few investors anticipated at the end of 2024, given the prevailing narrative of American exceptionalism.
The unpredictability, volatility, and impulsiveness of President Donald Trump are adding to investor uncertainty. An escalating trade war, declining consumer confidence, and persistent inflation are weighing especially heavily on growth stocks, which had been trading at lofty valuations. Combined with a correction in AI favorites, this resulted in a disappointing start to 2025, particularly for aggressive growth funds.
Against this backdrop, we take a closer look at two funds in the Morningstar category Global Large-Cap Growth Equity, both of which have been qualitatively rated by Morningstar analysts. We’ll discuss the similarities and differences between GuardCap Global Equity and Fundsmith Equity.
People
Both funds are managed by teams that rank among the best in their category, earning them a High People Pillar rating.
GuardCap Global Equity is led by Michael Boyd and Giles Warren, who have worked together for 25 years. Since 2014, they’ve managed this strategy at GuardCap following their shared tenure at Seilern. The team is further supported by portfolio managers Bojana Bidovec and Orlaith O’Connor, as well as analyst Satvik Subramaniam. Their investing experience, stability, and unwavering commitment to the investment philosophy—combined with a patient, long-term mindset and a highly collaborative approach—set them apart. Each team member closely tracks only ten to fifteen companies, which is key to their in-depth fundamental research.
These characteristics also apply to Fundsmith Equity, where the outspoken Terry Smith leads a compact five-person team. A key difference is that the Fundsmith team operates across multiple locations: New York, London, and Mauritius, where Smith himself resides. In contrast, the GuardCap team is fully based in London, which enhances internal debate and collaboration.
As for succession planning, while retirement is not yet imminent for the longest-tenured managers, the topic is relevant. At Fundsmith, the transition appears more concrete, with Head of Research Julian Robinson seen as the leading candidate to succeed Smith. At GuardCap, the future decision-making structure is less defined, but the strength of the team makes the strategy less dependent on a single individual.
Process
Both funds pursue a proven quality-growth strategy rooted in deep fundamental research, but we rate GuardCap’s execution slightly higher. This results in an Above Average Process Pillar rating for Fundsmith and a High rating for GuardCap.
GuardCap’s analysis process is long and intensive. Initial research can take over twelve months, with companies undergoing multiple stages of analysis and meticulous scrutiny. Findings are documented in detailed reports and used as the basis for structured debates. Portfolio managers vote jointly on a stock’s progression to the next stage, resulting in a High Confidence Pool of up to 50 stocks, from which Boyd and Warren construct the portfolio.
Fundsmith also employs rigorous bottom-up research. Robinson validates all DCF models for the 80 companies that meet their strict criteria before Smith evaluates them. While the process is generally disciplined, the sell discipline has proven to be a weaker area.
Portfolio
Both funds follow a buy-and-hold strategy, with concentrated portfolios reflecting the managers’ core convictions.
GuardCap’s portfolio consists of 20 to 25 stocks, with managers fully expressing their strongest ideas. While focused on high-quality growth stocks, the portfolio is relatively well-diversified across sectors. GuardCap has no benchmark constraints, which is evident in the absence of semiconductor companies, deemed too cyclical.
Fundsmith has a slightly stronger growth profile and scores higher on quality metrics. The portfolio holds 20 to 30 positions, with top convictions carrying more weight. Individual holdings can represent 8 to 9 percent of the portfolio. Defensive sectors such as consumer staples and healthcare make up roughly 50 percent of Smith’s portfolio, while GuardCap leans slightly more cyclical with positions in consumer discretionary and financials.
Regional exposure also differs: Fundsmith has a strong focus on U.S. companies (70 percent of the portfolio), while GuardCap takes a broader approach with 56 percent in the U.S. GuardCap sees greater potential in European equities and has direct exposure to Asia through Yum China.
Performance
For both strategies, performance is heavily dependent on stock selection. Given the high portfolio concentration, missteps can be costly. GuardCap has proven its added value: since its 2014 launch, the strategy has invested in 39 different stocks, only four of which delivered (marginally) negative returns.
Still, the past two years have been challenging for GuardCap. The lack of exposure to the dominant Magnificent 7 meant the fund missed out on much of the market’s upside. In addition, (in)direct exposure to the Chinese consumer weighed on results. Fundsmith also experienced rough patches in stock selection, with disappointing results from companies like Estée Lauder, Diageo, and Brown-Forman.
However, both funds performed well during market downturns, as demonstrated in the first three months of 2025. GuardCap and Fundsmith were among the top performers in their category in Q1, further boosting their risk-adjusted returns. Over the long term, both continue to deliver excellent returns—particularly on a risk-adjusted basis.
Jeffrey Schumacher is Director of Manager Research at Morningstar Benelux. Morningstar analyzes and rates investment funds based on quantitative and qualitative research. Morningstar is part of the expert panel of Investment Officer.