Results analysis: Martin Currie Global Portfolio

• Today Martin Currie Global Portfolio (MNP) released its annual results for the period ending January 2021. Over the year, the trust delivered NAV total returns of 20.2%, with a share price total return of 20.5%. This compared extremely favorably relative to the benchmark MSCI All World Country Index, which returned just 12.3%.  (Source: Martin Currie)
• The trust has paid three interim dividends of 0.9 pence per share and intends to pay a fourth interim dividend of 1.5 pence per share. As such, the total dividends are in line with the previous year, an impressive feat given the economic conditions. 
• The board have continued to make progressive developments in its goal of growing the trust, including a new gearing facility and an improved fee structure. 
• The team recognise that there continues to be uncertainty surrounding the impact of the pandemic. However, the board stated “as the long-term effects unfold over time, an investment approach which focusses on a limited number of holdings researched in great depth and promising excellent growth prospects provides, we believe, an effective way to invest for the future”.

Kepler View

Martin Currie Global Portfolio (MNP) is a highly attractive source of diversified returns for investors. Since Zehrid Osmani took over management of the trust on 30 June 2018, MNP has delivered a NAV total return of 57.2%, in comparison to the 38.1% of the MSCI ACWI Index. We have also seen it move from a 1% discount to a 1.2% premium over the same time period (source: Morningstar, as at 19/04/2021). This strong outperformance has come despite not holding any of the FAANG companies, which have dominated global indices and their returns. MNP can be seen as a strong choice for diversification against broader global equities, especially as investors haven’t suffered in performance terms as a result of the lack of exposure to these stocks.

A key part of the outperformance during the difficult 2020 financial year has been the great levels of depth Zehrid and the team go to when looking at companies. After the pandemic hit they created forecasts for all companies held, working on a scenario of a severe recession, a gradual recovery rather than a V-shaped one and with no return to previous activity levels projected until some point in 2022 based on their internal forecasts. They also stress-tested each company balance sheet and assessed its liquidity risks. That assessment was extended to the key suppliers and customers of all the companies in which we were invested. This level of detail is a key characteristic of the MNP and helps to ensure that the risks across holdings are managed properly – which is vital given the highly concentrated nature of the portfolio.

Looking forward Zehrid is confident that there will be a strong recovery, although the scale of it remains uncertain due to a number of macroeconomic factors, be it inflationary risks or supply chain vulnerability. As such, the team will continue to invest using their thematic mega-trends framework which has driven success in the past, focussing on the three trends; Demographic Change, Future of Technology and Resource Scarcity. As we discuss in greater detail within our research note, there are themes within each of these mega-trends, which provide them with long-term structural growth opportunities, many of which have developed further opportunities due to the pandemic.

Recently it was announced that the trust had entered an unsecured sterling term loan facility agreement with The Royal Bank of Scotland International Limited which was fully drawn the next day at a fixed interest rate of 1.181% for a three-year term. At the time of drawing, the loan represented approximately 10% of the then NAV and at the 31 January 2021 year end gearing represented 6.6%.

Also worthy of note is the new tiered fee structure achieved by the board, which should see MNP’s OCF fall as the trust grows. The trust has proved popular with investors. In February 2021 the trust reached a point where almost all of the directors’ authority to issue shares on a non-pre-emptive basis had been utilised. Currently MNP is trading at a premium of 1.2%, although over the last year the premium has reached as high as 7.4%.

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