Mid Wynd International 15 April 2020
Disclaimer
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.
The key aim for the managers (Simon Edelsten, Alex Illingworth and Rosanna Burcheri) is to outperform the MSCI AC World Index (MSCI ACWI) over the long term. They have achieved this since taking over the portfolio in 2014, with the trust generating NAV total returns of 95.9%, compared to 63.5% for the MSCI ACWI and 55.7% for the AIC Global sector.
performance under the managers' tenure
Source: Morningstar
This outperformance has come in both rising and falling markets, as the chart below shows. The trust has outperformed the benchmark in three of the past five bull markets, while outperforming in both of the falling markets. Relative to the AIC Global peer group, the trust has outperformed in four of the five rising markets and both of the falling markets. Further supporting this, over the past six years the team have a downside capture ratio of just 71.7%, and an upside capture of 102.3% (Source: Morningstar).
Calendar-year returns
Source: Morningstar
In the short term, Mid Wynd has done relatively well in the COVID-19-inspired sell-off, as many of the themes the managers focus on seem to be potential beneficiaries. For example, Amazon and Microsoft, the two largest positions in the portfolio, have performed particularly well as more and more consumers discover online shopping and remote-working software. In Amazon’s case, it has even positioned itself as almost a utility. Similarly, the likes of Sysmex, the blood-testing equipment company, and Reckitt, the manufacturer of Dettol, have performed particularly strongly in the current environment for unrelated reasons. Meanwhile, the managers’ scepticism about the future of air travel (given concerns about its environmental impact) left them with no exposure to airlines or airports and limited exposure to tourism.
performance
Source: Morningstar
The managers believe that this could be a significant moment in stock-market history as a number of new ways of working and living will be much more widely adopted. They therefore do not believe now is the time to ‘bottom fish’ and invest in companies that are struggling but trading on cheap valuations, but instead remain resolutely focussed on companies benefitting from secular changes in society.
Thanks in part to the strong performance during the crisis so far, the trust has lost just 13.6% of the NAV over the three months since the start of the year (to 3 April 2020). This compares to an 18.3% total-return loss from the MSCI ACWI and a 17.7% loss from the AIC Global sector. This is the fifth-strongest performance of any in the AIC Global sector; however, it is worth noting that three of the better-performing companies hold unlisted companies which might still be yet to have their NAVs updated.