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%.
It is our opinion that Mid Wynd International Investment Trust has 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, forms our opinion 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.
|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|