Mid Wynd International 16 December 2024

Mid Wynd International (MWY) invests in global quality compounders, which are businesses benefitting from barriers to competition, generating high return on capital and having the ability to reinvest this cash into the growth of the business. The managers, Louis Florentin-Lee and Barnaby Wilson, invest with a long-term view and avoid moving in and out of a stock too frequently to benefit from the effects of compounding. As a result, the portfolio’s turnover is typically low, within a 10% to 15% range. In having a strictly applied process for picking stocks, and assembling the portfolio, the team aim to deliver repeatable outperformance over time.

Since the appointment of Louis and Barnaby as managers as of 01/10/2023, MWY has returned 17.6% on a NAV total return basis, although this strong return in absolute terms has not been sufficient to match the performance of the MSCI ACWI Index. Market returns have been concentrated within a narrow cohort of stocks amid the artificial intelligence (AI) frenzy, and active strategies have struggled as a result. Long term, the Lazard Global Quality Growth strategy (the institutional strategy that MWY replicates), has generated 1.75 percentage points per annum in excess of the MSCI ACWI Index since its inception on 01/02/2011, as discussed under Performance.

At the time of writing (10/12/2024), MWY was trading at a narrow Discount of 1.4%, with the board aiming to keep the share price within a 2% band relative to the NAV through the use of share buybacks. Despite the trust’s assets falling, MWY’s market capitalisation is £379.5m, meaning it has critical mass. It is also one of the cheapest investment trusts in the AIC Global sector, with an ongoing charges ratio (OCR) of 0.6%.

In our view, MWY could be an attractive proposition for investors willing to ignore market noise and to take a long-term view through a proven investment strategy focussing on quality compounders. The managers believe that these types of stocks generate wealth for investors over the long term, although they may not consistently outperform in the short term. Notably, the Lazard Global Quality Growth strategy has outperformed the MSCI ACWI Index since its inception in February 2011, and the managers’ strict investment process offers the potential that it may continue to deliver outperformance in the future too.

Historically, the team’s outperformance has been achieved with a lower level of risk than the market. Combined with the fact the trust does not use gearing, we believe MWY could be suitable for more cautious, long-term equity investors. The fact that the board has successfully maintained the discount within a 2% range should help mitigate discount risks.

Another key strength of MWY, in our opinion, is that the portfolio is exposed to different drivers of returns. This could prove beneficial if market leadership shifts beyond the Magnificent Seven. With an active share of 85.7% (as of 30/09/2024), MWY is likely to behave differently from a global index or a more benchmark-aware strategy, offering potential diversification within a portfolio. Furthermore, it presents a differentiated proposition compared to one-stop shop solutions or high-growth-oriented peers in the AIC Global investment trust sector.