Mid Wynd International

MWY is a core global equity offering, with both upside potential and downside protection…

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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Mid Wynd International. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Mid Wynd International

Mid Wynd International Investment Trust (MWY) invests in a portfolio of high-quality global stocks, with the objective of growing its investors’ real returns. The management team consist of Simon Edelsten, Alex Illingworth and Rosanna Burcheri. They make heavy use of long-term themes across the world, anticipating how they will evolve over three to five years. The team are also valuation-sensitive, and typically use a cash flow or asset-based valuation when determining the underlying holdings.

As outlined in the Portfolio section, the strategy typically utilises eight to ten themes, with many more under constant review for possible inclusion. The three largest themes are currently online services at 22.6%, automation at 12.4% and low-carbon world at 11% (as at 30/09/2020). The portfolio is positioned towards quality growth, though it is by no means an exclusively growth fund and has the potential to rotate to value when appropriate. The team have implemented a negative stock screen and effective ESG analysis, receiving a five-globe rating for sustainability by Morningstar, its highest rating.

The investment strategy is designed to not only capitalise on the upside, but also to protect capital on the downside. Since taking over the strategy in May 2014 the team have largely achieved this objective, generating a cumulative NAV performance of 150.4% since taking over. This compares to 105.0% from the benchmark, with MWY also achieving a five-year 100.7% upside capture and a downside capture of 78.8% versus the benchmark. While dividend growth is not its primary objective, MWY also offers investors a progressive dividend payout, with a current yield of 0.9%.

Kepler View

It cannot be said that Mid Wynd International Investment Trust has not delivered on its objective. Since taking over the management of the trust, the team have managed to deliver outperformance versus the benchmark without ever truly failing on the downside, something evidenced by their recent performance during the COVID-19 pandemic. Having an investment process that focusses on themes and valuations rather than solely on stock-picking or macro factors produces a portfolio of core equities which is able to evolve with economic cycles. The current quality growth positioning to some extent explains the recent outperformance, but the team’s awareness of a need for a potential shift to value should bring confidence to an investor looking to hold this trust through multiple cycles.

The ESG credentials of the strategy are exceptionally strong, as shown by the Morningstar rating, but what we particularly like is the clarity in how MWY integrates ESG and its reporting. This, plus the team’s pragmatism in identifying ESG factors material to their valuations, gives us confidence that the portfolio will remain ESG-compliant in the future and that its integration will enhance returns.

The trust trades at a premium currently; however, the board makes an effort to keep the share price +/-2% from the NAV, so we feel that investors should not be too concerned about purchasing at a small premium.

bull bear
Managers have delivered on risk and return objectives since taking over in 2014 May mistime the rotation of value
Flexible and thematic approach allows the portfolio to evolve with markets Avoidance of certain themes (including negative screens) may mean missing out on outperformance during a post-COVID recovery (e.g. from tourism)
Disciplined discount control The team do not capitalise on momentum as much as their peers or the benchmark
David Johnson
David is an investment trust analyst and joined Kepler in September 2020. Prior to this he ran multi-asset model portfolios at a discretionary fund manager, and has worked in both asset management and investment banking during his career. He holds a Masters in Finance from the University of Warwick and is a CFA charterholder.

Fund History

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

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