Investors in the Mid Wynd International Investment Trust should take a wait-and-see approach to the new managers selected by the board, according to experts.
It announced in June that Lazard would be taking over from Artemis as manager of the £428m portfolio – a move that may leave some shareholders wondering how the new firm and managers will integrate with the Mid Wynd strategy.
The board decided to switch up the team in preparation for current manager Simon Edelsten’s retirement later this year. He has run the trust since 2014, during which time it beat the IT Global sector by 80.1 percentage points with a total return of 184.8%.
Total return of trust vs sector under Edelsten’s management
Source: FE Analytics
Edelsten’s experience was an attractive quality to the trust, so Artemis were quick to place Alex Stanic as co-manager ready to take over his portfolios at the end of the year.
He moved over from J.P. Morgan, where he had previously managed the JPM Global Unconstrained Equity fund, which beat the IA Global sector with a total return of 55.4% during his five-year tenure.
Despite this, the board decided to make a change announcing Lazard duo Barnaby Wilson and Louis Florentin-Lee as the new managers.
Under their stewardship, the Lazard Managed Equity fund is up 27.5% since 2019, trailing 8.6 percentage points behind its peers in the IA Global sectors.
Total return of funds vs sector during each manager’s tenure
Source: FE Analytics
Chris Salih, investment trust research analyst at FundCalibre, was positive on the original appointment of Stanic back in February.
He said Stanic’s track record of outperforming global equity markets should reassure investors in what could otherwise have been a troubling period after Edelsten’s retirement announcement.
“The fact that Alex has a similar style of investing – albeit with lower turnover – coupled with a 10-month handover period with Simon on both the Global Select fund and Mid Wynd trust, should offer investors some reassurance of an orderly transition,” Salih said.
“While the regional teams at Artemis tend to be autonomous in nature, Alex’s appointment to the global team gives them the opportunity to make a greater collegiate use of the geographical teams already in place – a welcome move given the strength they have within the likes of the UK and US franchises.”
However, Salih was less encouraging about the latest manager choice, largely because they had not come across his radar before.
On closer inspection, he said a lot of its underperformance could be attributed to the fact that the global fund has more than half (51.9%) of its holdings in UK equities.
Instead, there was a closer resemblance to the Mid Wynd strategy in their most recent fund – Lazard Global Quality Growth – which was launched last year.
Salih added: “We’re not familiar with the new managers, but on the face of it they are looking for similar companies as the trust – quality growth. Neither of the two new managers looks to have managed an investment trust before though.”
Although the fund has been active since 2022, its quality-growth strategy has been used by the firm since 2011 and included some overlap with some of the names in Mid Wynd.
The most noticeable difference between the two is their emerging market and Asia exposure, according to Salih. Mid Wynd has a 7.9% weighting to the region, whilst the Lazard fund has none.
Although investors should remain alert around the trust’s transition over to the new firm and managers, Salih said it is worth waiting to see how things play out.
“At this stage, I’d stick to hold and await further information on how the trust will be managed going forward,” he said. “There is no need to make a knee-jerk reaction and investors can take their time reviewing the new offering versus alternatives.”
This was echoed by James Carthew, head of investment company research at QuotedData, who said the move “might work but we’ll have to wait and see”.
He praised Edelsten for delivering “impressive numbers” on the Mid Wynd trust despite facing challenging headwinds in recent years.
“Its [total return] has been really quite impressive,” he said. “It just goes up in a straight line until of course we get to the more difficult period with interest rates flying in 2022.
“Nevertheless, that’s still not too bad in the context of things and it’s been trading quite close to asset value.”
Looking at the Lazard Global Quality Growth strategy used by Wilson and Florentin-Lee, Carthew said he saw a closer resemblance to Fundsmith than Mid Wynd.
Its focus on high returns on capital and growing companies that are reinvesting their cashflows reminded him more of Terry Smith’s approach, except the Lazard team seem to have a lower weighting to consumer staples and higher conviction in technology and financials.
While Carthew remains uncertain on the trust’s future, he said its move over to Lazard could come with its own benefits. The firm generally has lower fees that investors do not have to pay for the first three months.