Mid Wynd International 31 August 2022

Mid Wynd International (MWY) provides investors with a portfolio of listed global equities with a focus on generating long-term returns to increase the real wealth of their shareholders in a consistent manner. As discussed in the Portfolio section, there is an emphasis on ‘quality growth’ throughout the portfolio, but the managers, Simon Edelsten and Alex Illingworth, maintain a flexible approach and rotate between a range of core themes that they believe will generate sustainable sources of growth for investors. In addition, they emphasise the importance of valuations and favour companies that can provide evidence of future cash flow stability to support elevated share price levels. If not, they have been happy to book profits and recycle into more cheaply valued companies and sectors to try and exploit pricing inefficiencies. Over the past 12 months, Simon and Alex have increased the portfolio’s exposure to more consistent, somewhat inflation-protected, sectors such as telecommunications and healthcare.

As discussed in the Performance section, MWY has performed particularly well over the long term. It has been a tough market environment in 2022. However, the trust has maintained a degree of outperformance versus its growth-dominated Morningstar Global Investment Trust sector peer group, reflecting the benefits of the managers’ flexibility and focus on downside risks. In fact, risk-adjusted performance has also been particularly strong over the long term compared to both peer group and benchmark. We believe that this is notable when the severity of the drawdowns experienced by their ‘quality growth’ peers is considered. As mentioned in the Discount section, MWY remains one of two trusts to trade at a slight premium amongst its global sector peer group.

As discussed in the Management section, MWY has introduced recently two new analysts to the team, in an effort to enhance their demonstrably strong ESG characteristics and to expand the team’s diversity of thought – aiming to impact positively the overall portfolio’s construction.

In our view, MWY has the potential to form a ‘core’ equity holding for a broad range of investor types. The trust offers a more diversified exposure to global equities compared to some of the large-cap-focused global equity trusts in its peer group. Additionally, Simon and Alex allocate across a range of themes that aim to benefit from the structural shifts taking place in the global economy, such as automation, a low carbon world and digital banking. As a result of the low carbon theme, we believe that the portfolio is likely to appeal also to ESG-conscious investors. In addition, we find the managers’ flexibility and willingness to shift their investment style to accommodate a greater allocation to value in the evolving economic landscape to be refreshing. Indeed, over the long term, the managers have proven their capabilities to provide a portfolio that has been able not just to beat consistently the benchmark and the peer group in terms of upside return generation, but also in terms of downside protection. We believe that this may suit the more cautious investor in an historically volatile sector.

Although it has been a tough first half of the year for the trust, we believe that it would be unfair to scrutinise MWY’s strategy too harshly as this has been a broad-based quality growth sell-off over a particularly turbulent period. Considering this, we have been pleased to see that MWY has maintained its outperformance over the past 12 months and indeed year-to-date versus the global peer group. The reduction in the portfolio’s growth-focussed technology holdings and rotation into sectors likely to benefit from recent events such as healthcare costs and inflation-backed assets, together with the discount/premium control policy, should dampen the volatility and provide some consistency with respect to shareholder value relative to NAV.