Mid Wynd International 07 February 2023

Mid Wynd International (LON:MWY) aims to offer investors a core global equity solution which is capable of delivering consistent risk-adjusted returns across the market cycle. MWY’s managers, Simon Edelsten and Alex Illingworth, have identified 20 core themes that they believe will benefit from long-term secular trends in the economy. At any one time, the portfolio contains stocks benefitting from around ten of those themes, depending on valuations and near-term prospects.

The team’s cash-flow analysis helps to identify underpriced or overpriced opportunities, based on the strength of their asset bases and cash-flow sustainability. Recently, elevated valuations and alternative value opportunities have led to a reduction in themes such as online services and screen time. Instead, there is a greater focus on sustainable consumption, healthcare costs, automation, and digital finance, along with a geographical shift away from the US and into Europe, Asia and Japan. There is still, as there always is, an emphasis on the importance of strong ESG characteristics throughout the investment process.

The managers’ flexibility, focus on minimising downside risks and cautious approach to Gearing has led to relatively strong NAV Performance. This has been displayed over the short term when compared to several of its growth-centric peers, and the long term versus both the sector and the global equity benchmark, combined with relatively low volatility. Historically, MWY has traded at a consistent premium. However, as we discuss in the Discount section, MWY now trades at a 0.3% discount, albeit the narrowest within the sector.

MWY has been able to deliver strong risk-adjusted returns for investors over the long term, despite the turbulence in financial markets over the past three years. The flexible approach taken by Simon and Alex has allowed them to be dynamic in their portfolio construction. Quality growth remains at the heart of the portfolio’s construction, however, following the bounce-back period after the height of the coronavirus pandemic. In our view, the pair have responded sensibly to the array of lofty valuations seen in equity markets. By trimming growthier themes, such as online services and screen time, whilst topping up on more core, valuation-based investments, such as healthcare costs, sustainable consumer and digital banking, they have constructed a more balanced and diversified portfolio which we believe looks attractive as a core equity solution.

2022 was a tough year for the trust in absolute terms. The impact of the broad-based growth sell-off at the start of the year has been hard to shake off, as persistent inflation and higher interest rates formed a sharp structural shift in the economic landscape. However, we believe that Simon and Alex’s asset-based and cash flow valuation-sensitive approach, and a willingness to alter the portfolio’s thematic exposures, demonstrates their ability to construct a portfolio that balances its exposure to suit the current environment with the long-term secular growth trends.