Investment

New managers aim to prove great firms can make great investments



It has been all change at investment trust Mid Wynd International over the past six months. New managers have been appointed, the fund’s portfolio has been overhauled, and the trust’s charges have been reduced.

Although it is too early to assess whether the transformation will result in enhanced returns for shareholders, the new fund managers are confident that the refresh will be to the benefit of investors.

‘Our philosophy is simple,’ says Louis Florentin-Lee, who, with Barnaby Wilson, now runs the £411 million trust, which is listed on the London Stock Exchange. ‘Great companies can make great investments.’

The duo work for Lazard Asset Management, which won the race to take over at the trust last October. They unseated investment house Artemis after the trust’s board became concerned when the managers assigned to the fund left the firm.

Lazard’s approach is built around identifying ‘quality growth’ companies – global businesses that generate sustainable long-term profits from the capital they employ, thereby creating value for shareholders. It is an investment strategy that Lazard developed 13 years ago, and assets worth £1.6 billion are run according to such a mandate.

‘Investment theory states that market domination cannot persist because of the laws of competition,’ says Florentin-Lee. ‘We fundamentally disagree with this. Some businesses can build robust moats around what they do, and as a result thrive long-term and resist competitive forces.’

Lazard says there are 200-plus quality growth companies that it monitors. These are all characterised by operating in markets where barriers to entry make it difficult for competitors to make effective challenges to the status quo. They all also have the ability to keep making profits and reinvesting in their businesses.

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The only differentiator is their market valuation – which determines whether Lazard buys, holds or sells them. Currently, Mid Wynd has 41 holdings, only six of which remain from the Artemis era. A recent addition to the portfolio is Swiss-listed VAT Group, a producer of vacuum valves used in the manufacture of semi-conductors.

‘The valves play a critical role in ensuring the semi-conductor production process is not corrupted by dust particles,’ says Florentin-Lee. ‘VAT has 75 per cent market share and supplies the likes of Dutch giant ASML and Taiwan Semiconductor Manufacturing Company. Its importance is such that it is often brought into the designing of new products.’

Another holding, which was bought last October, is US-listed Amphenol, a manufacturer of electronic and fibre-optic inter-connectors which are used in the aerospace and car industries.

‘Without them, your laptop would not work,’ says Wilson. ‘Amphenol is renowned for the quality of its products and its hold on the market is such that it generates high returns on the capital it employs.’

Only one UK-listed company makes it into Mid Wynd’s portfolio – analytics company RELX. But the managers insist that there are lots of ‘high quality UK businesses’ on their watch list. In terms of returns, Florentin-Lee and Wilson have delivered respectable shareholder gains of 10 per cent over the past six months. But their strategy is very much focused on the long-term – companies they buy into tend to be held for between seven and ten years.

Overall annual fund charges are 0.62 per cent, lower than when Artemis was manager. Income generation is of secondary importance with payments equivalent to one per cent per annum. The stock market identification code is B6VTTK0 and the ticker is MWY.

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