Terry Smith’s Fundsmith Equity might have been a top performer for nigh on a decade, but there is one aspect of the fund I have always struggled with: its annual charge.

Maybe when the fund launched in 2010 a fee of 1.04 per cent was par for the course, but in 2024 it feels a bit rich. This is especially true at a time when investors are flocking to low-cost tracker funds, which can be picked up for as little as 0.06 per cent.

Fundsmith Equity is an actively managed investment fund that can hold stocks from across the globe. It built a name for itself with a high conviction, buy-and-hold approach — meaning that it owns very few stocks (typically about 20-25) and holds them for years at a time.

Smith has always argued that strong performance has justified the fee and for many years that was a solid argument. Fundsmith Equity has returned 602.4 per cent since it launched. A £10,000 investment at its inception would be worth more than £70,200 today. Surely that’s worth a 1 per cent price tag?

More recently, however, it has been difficult to make that case. Over the past year the fund has returned 10.2 per cent, according to the investment firm AJ Bell, while its benchmark index, the MSCI World, is up 17.2 per cent. The average global fund has returned 12.9 per cent over the same period and the best global fund is up 55 per cent, AJ Bell said.

In his semi-annual letter to shareholders this summer, Smith wrote: “Our fund was up 9.3 per cent in the first six months of the year, 3.4 percentage points less than what is perhaps the most obvious comparator — the MSCI World Index.” In other words, investors would have done better in a global tracker fund.

Are investors starting to come to precisely this conclusion? At its peak, in December 2021, Fundsmith Equity was the biggest equity fund in the UK with almost £29 billion of investors’ money. It has since shrunk by about £4 billion, according to the research firm Morningstar Direct, as investors turn elsewhere.

There have been net withdrawals (meaning more money has been taken out than put in) from the fund every month since May 2022, when investors withdrew £622 million, Morningstar Direct said.

At the same time, Fundsmith Equity has slipped down the list of most-bought funds across many of the major investment platforms, or out of the top ten altogether.

Why has this fund, which was once such an investment darling, apparently fallen out of favour?

Fundsmith was launched with a simple motto: buy good companies, don’t overpay, do nothing. Smith quickly attracted a loyal fanbase for his straight-talking and investment talent. In an industry built on “buy, buy, sell, sell”, and following the latest fad or trend, his strategy of holding for the long term was refreshing. And for a long time, it delivered.

Some investors will doubtless have jumped ship as performance has faltered. A short period of underperformance can be forgiven, but Fundsmith Equity has been missing the mark for a while. Over five years the fund is up 51.8 per cent, compared with 68.7 per cent from the MSCI World Index. It is worth pointing out that most global funds have failed to beat the index too — AJ Bell’s latest Manager versus Machine report found that just 22 per cent had managed to outperform over the past decade.

The upward march of the US technology stocks known as the Magnificent Seven is partly to blame. Essentially, any fund that has not piled into Nvidia shares over the past year or so has underperformed the market.

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But Smith likes consumer companies, with loyal customers and pricing power, that can keep growing whatever the weather. Think beauty giant L’Oréal, software behemoth Microsoft and the medical devices company Stryker. “We do not own any Nvidia as we have yet to convince ourselves that its outlook is as predictable as we seek,” he told shareholders.

It is to his credit that Smith sticks to his strategy rather than capitulating and buying a stock just because Mr Market says so. Many fund managers would not be so resolute.

And having such strong convictions invariably leads to difficult times — Smith is not the first manager to discover this, and it took him longer than most to get here. But this will not last forever and investors who sold the fund may regret doing so if performance was their only reason. Those selling because of the fee, however, may have a better case.

Fundsmith Equity was one of the first funds I bought, back in 2012, on the advice of the editor of the investment magazine where I worked. The fund more than doubled my money. But increasingly I struggled with its charges, even despite the table-topping performance. As the size of the fund swelled, I felt that the economies of that scale should be passed on to investors with a reduction in charges — something many fund groups do.

As do-it-yourself investment platforms were becoming more widely used and regulation had banned commission on fund sales, the trend in fees was decisively downward. Between 2015 and 2020 the average active fund charge fell from 1.08 per cent to 0.89 per cent, according to the Financial Conduct Authority, the city watchdog. But Fundsmith Equity has never wavered.

Fundsmith said: “We never set out to be the cheapest. We have a simple annual management charge and no initial, exit or performance fees. We are focused on, and believe investors should also be focused on, performance net of all fees, which is up over 599.9 per cent since inception.”

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I sold out, even as performance continued to soar and the fund attracted more and more of investors’ cash. When a fund keeps doubling your money, it is easy to overlook the fact that it is expensive. But that high fee becomes harder to ignore when performance falters and I wonder if we are seeing the fallout from that.

If you invested £100,000 in a fund charging 1.3 per cent and it grew 6 per cent a year for 30 years, you would have about £390,800, according to the fund company Vanguard. Cut the charge to 0.7 per cent, however, and your investment would grow to £465,900. Now tell me that fees don’t matter.

I have no doubt that Fundsmith’s performance will bounce back, but reducing the charge would ease the pain for the loyal investors who are patiently waiting for that time to come.