Mid Wynd: an investment trust profiting from long-term trends

Artemis' Mid Wynd International, a thematic investment trust, offers a good way to diversify a growth portfolio, says Max King.

The exceptional performance of funds run by Baillie Gifford over the last ten years has enabled it to grow existing trusts, launch new ones and take over the management of others. Back in 2014, however, it lost one to Artemis – the strangely named Mid Wynd International Investment Trust (LSE: MWY), which is now managed by the team of Simon Edelsten, Alex Illingworth and Rosanna Burcher.

Mid Wynd, named after an obscure alley in Dundee, has grown to £320m of assets, thanks to strong performance and regular share issuance. Returns of 98% over five years and 41% over three are well ahead of the 74% and 25% returns of the FTSE World index, helped by 8% outperformance in the last six months. This is still well behind Scottish Mortgage and Monks, but past returns are an unreliable guide to the future and Mid Wynd’s differentiated style adds diversity for those nervous of having too many eggs in the Baillie Gifford basket.

Beware of the fads

The team seeks to “select a number of long-term trends from around the world and then construct a portfolio that can benefit from these trends over the long term, regardless of the short-term economic environment”. Thematic investment has a mixed reputation as it is easy for inexperienced investors to follow popular fads only to find that these are widely reflected in share prices and are not durable. The themes in Mid Wynd are not necessarily original, but they are durable, while “a disciplined approach to valuation” is superimposed. 

This results in a growth-orientated portfolio. Online services accounts for 22%, including not just Amazon, Microsoft and Google, but also Equinix, which operates 205 data centres in 25 countries. Japanese firms, notably Difuku and Daikin, are well represented in the automation theme (12%), while the focus in healthcare (11%) is on controlling the cost to government as much as on innovation. Another 10% is in scientific equipment, including the largest holding, Thermo Fisher Scientific, at 2.5%, while 10% is in the growth of consumer spending in emerging markets (LVMH and L’Oréal). Tourism was dropped a year ago on the grounds that its success was provoking an environmental backlash but Booking.com and Amadeus were recently added back to the portfolio. 

“We have nothing in a lot of sectors, with banks, oil and retailing the most troubled areas,” says Edelsten. He describes the portfolio as “defensive as well as growth”, which would have sounded contradictory until this year. 

Stocks that stick to their guns

Like all good managers, Edelsten makes stock selection sound easy. He advocates “choosing companies that stick to what they are good at and invest in their own businesses”, pointing to Kongo Gumi, the world’s longest-lasting company, which was founded in Japan in 578, but fell into receivership a few years ago “as a result of taking on heavy debts and making dodgy investments in the 1980s real-estate bubble”. 

Diversification, though, isn’t obviously stupid at the time. BAT spent decades diversifying away from a core business that killed people into retailing, financial services and even cosmetics before returning its focus to cigarettes. Will Shell be any more successful with its diversification into renewable energy? Companies whose core business is in decline are under heavy pressure to diversify or change direction, but the best strategy may be to manage decline gracefully.

Through analysis of evolving trends, the Mid Wynd team is thinking ahead rather than extrapolating the past into the future. This promises many more years of outperformance.

Recommended

Why investment trusts are the connoisseur’s choice of fund
Investment trusts

Why investment trusts are the connoisseur’s choice of fund

Investment trusts have justified their reputation as the best type of collective investment in 2020, says Jonathan Davis.
7 Dec 2020
Why investors should take investment trusts up on their free lunches
Investment trusts

Why investors should take investment trusts up on their free lunches

Investment trusts are brilliant, says Merryn Somerset Webb. Perhaps the most brilliant thing of all about them is the fact that investors can meet and…
16 Nov 2020
If you think now is a good time to buy, look at these investment trusts
Investment trusts

If you think now is a good time to buy, look at these investment trusts

With the latest market slides, an awful lot of assets are beginning to look very cheap indeed. If you are thinking of buying, Merryn Somerset Webb has…
10 Mar 2020
How to build a properly diversified investment trust portfolio
Sponsored

How to build a properly diversified investment trust portfolio

Max King explains how to build a well diversified portfolio using one of our favourite tools – investment trusts.
25 Feb 2020

Most Popular

A simple way to profit from the next big trend change in the markets
Investment strategy

A simple way to profit from the next big trend change in the markets

Change is coming to the markets as the tech-stock bull market of the 2010s is replaced by a new cycle of rising commodity prices. John Stepek explains…
14 Jan 2021
Forget austerity – governments and central banks have no intention of cutting back
Global Economy

Forget austerity – governments and central banks have no intention of cutting back

Once the pandemic is over will we return to an era of austerity to pay for all the stimulus? Not likely, says John Stepek. The money will continue to …
15 Jan 2021
Here’s why markets have shrugged off the US political turmoil
Investment strategy

Here’s why markets have shrugged off the US political turmoil

Despite all the current political shenanigans in the US, markets couldn’t seem to care less. John Stepek explains why, and what it means for your mone…
7 Jan 2021