Martin Currie Global Portfolio Trust (MNP), managed by Zehrid Osmani, offers investors a concentrated portfolio of global equities with a high active share of c. 97%, differentiating it from both its peers and its benchmark. MNP’s impressive track record is in large part thanks to Zehrid’s successful stock selection and three-part investment process, outlined in detail in the Portfolio section. Zehrid’s forward-looking approach to analysis has led him to create a robust portfolio which has been partly insulated from the impacts of COVID-19, having accounted for just such a worst-case scenario prior to the outbreak. The team also make exhaustive use of proprietary ESG analysis, and MNP ranks in the top 2% for sustainability amongst over 6,700 global equity peers.
Since taking over sole management of MNP in October 2018, Zehrid has generated an NAV total return of 42%, exceeding the MSCI ACWI benchmark’s 22.9% return over the same period. It is important to note that this performance was achieved with a substantial underweight to the large-cap technology stocks which have driven a significant proportion of global equity markets’ performance over the last two years. Despite its commendable performance, MNP has traded closely to NAV, helped by the board’s proactive policy of discount control, and currently the trust trades on a premium of 3.1%.
Recently MNP has enacted a new gearing policy to better take advantage of the trust structure, whereby it has implemented £30m in gearing, equivalent to 9% of the current NAV. Alongside this the board has seen fit to implement a new charges structure, with the intention of simplifying the overall cost of the strategy.
We view MNP as a highly differentiated, high-conviction portfolio due to its zero exposure to FAANG stocks and high active share. Zehrid’s strategy of constructing a diversified portfolio, rather than simply being overweight to his highest-conviction stocks, gives us confidence in MNP’s ability to offer clients a superior source of diversification. From the start of his tenure Zehrid has been able to provide returns in excess of those of MNP’s benchmark, despite MNP’s underweight to mega-cap technology shares, ultimately fulfilling the trust’s objective of outperformance.
The two recent changes to MNP, specifically the introduction of £30m in gearing and reduction in fees, are ultimately a benefit for investors. The introduction of gearing will improve the overall return potential of MNP (given its long-term outperformance), as well as making use of the unique advantages of a trust’s structure. The change in the fee structure reflects the board’s desire to grow the trust, something we also foresee occurring given Zehrid’s record of outperformance.
While we believe MNP’s advantage ultimately lies in its ability to provide both superior returns and diversification, the presence of a modest yield is welcome. MNP’s track record of growing, or at least maintaining, its dividend over the last 16 years is yet another attractive feature of an already competitive trust. Its ESG credentials are almost unrivalled in both the open- and closed-ended spaces, with a five-globe rating from Morningstar making it an excellent choice for a sustainability-minded investor.
|Diversified portfolio of global equities with high active share
||Large bias to quality growth stocks may cause underperformance in a value recovery
|Strong outperformance since the manager took over
||Manager’s intentional avoidance of direct exposure to the FAANG stocks has been an overall detractor
|Portfolio does not hold traditional mega-cap names, yet has still generated strong returns
||Recent use of gearing may negatively impact performance during down markets