Disclaimer
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
Humans like to group things together. Categorising information is a simple way of sorting the waves of data that we encounter on a daily basis, whether that be in the food we prefer or, if you live in a rough part of town, the streets you like to avoid after dark. Doing so stops us from overthinking and helps simplify our day-to-day lives.
Investing is no exception to this process. The problem with it is that we can end up like Procrustes, unwilling to accept prospective investments unless they fit within a predefined range. This inflexibility can make fund managers susceptible to risk as markets change and an approach that worked well in one period fails to do so in another.
For investors in closed-ended funds, this presents some risk. If you have a core holding in a trust whose managers are unwilling to respond adequately to a changing world, then you could be exposed to substantial losses if markets turn against whatever approach those managers take.
Fortunately there are trusts out there that take a more flexible approach to the market, one of which is Mid Wynd International (MWY). The trust has historically had a quality growth tilt to its portfolio but putting it into that stylistic box would be to overlook some of the trust’s recent activity.
Managers Simon Edelsten and Alex Illingworth trimmed some of their holdings in ‘online services’ last year and reallocated funds to companies in the telecoms and railway sectors. MWY takes a thematic approach to investing and Illingworth and Edelsten believe that businesses in both industries will be able to avoid the Damocles’ Sword of inflation which looks set to crash through the global economy this year.
Clearly the trust’s managers are willing to accept change and invest accordingly. Whereas high value tech may have driven markets for much of the past decade, a move towards deglobalization, higher commodities prices, and inflation may mean growth is to be found in so-called 'old' economy sectors in the years ahead. Failing to accept this could mean failing to deliver stronger returns.
Taking this approach has limited MWY’s downside this year. While MWY is down 4.9% in NAV terms in the year up to April 8th 2022, all other growth-oriented trusts in its sector have seen double-digit losses. It has also outstripped those funds in the past 12 months.
There are no guarantees that MWY will continue to outperform its peers but for investors looking for a trust that can respond effectively to whatever changes the world throws our way, MWY may have considerable appeal.
Past performance is not a reliable indicator of future results
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