Mid Wynd International Investment Trust
Mid Wynd International Investment Trust scours the globe with the aim of uncovering promising businesses with substantial growth potential. These are quality compounding companies that generate sustainably high returns on capital with the ability to reinvest at similar high returns to drive future growth. The result is a high-conviction portfolio of 40-50 stocks which the managers look to invest in over the long term to take advantage of those compounding effects.
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Louis Florentin-Lee, Co-Manager Louis Florentin-Lee is a managing director and portfolio manager/analyst for the global equity teams, including International Quality Growth and US Equity Select. He began his investment career in 1996 and joined Lazard in 2004, where he previously co-managed the Lazard European Explorer fund. Before Lazard, Louis was an equity research analyst at Soros Funds Limited and Schroder Investment Management. He holds a BSc (Hons) in economics from the London School of Economics.
Barnaby Wilson, Co-Manager Barnaby Wilson is a managing director and portfolio manager/analyst for the global equity teams, including International Quality Growth. He started his investment career in 1998 and joined Lazard in 1999 after working as a research analyst at Orbitex Investments. Barnaby holds a BA (Hons) in mathematics and philosophy from Balliol College, Oxford University, and is a CFA charterholder.
Louis Florentin-Lee, Co-Manager Louis Florentin-Lee is a managing director and portfolio manager/analyst for the global equity teams, including International Quality Growth and US Equity Select. He began his investment career in 1996 and joined Lazard in 2004, where he previously co-managed the Lazard European Explorer fund. Before Lazard, Louis was an equity research analyst at Soros Funds Limited and Schroder Investment Management. He holds a BSc (Hons) in economics from the London School of Economics.
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Barnaby Wilson, Co-Manager Barnaby Wilson is a managing director and portfolio manager/analyst for the global equity teams, including International Quality Growth. He started his investment career in 1998 and joined Lazard in 1999 after working as a research analyst at Orbitex Investments. Barnaby holds a BA (Hons) in mathematics and philosophy from Balliol College, Oxford University, and is a CFA charterholder.
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Investment process
This strategy is all about identifying companies across the globe which are not just financially stable (they can generate high returns on capital) but also with the ability to reinvest a significant amount of those returns back into the business to drive future growth. The managers believe the market tends to underestimate companies which demonstrate these characteristics, with the assumption being that these returns will eventually start to fade. By contrast, they believe these companies can continue to invest and innovate to “beat the fade” and compound returns for shareholders.
The investment process is split into three stages. The first is idea sourcing, where screens are used to evaluate companies based on financial productivity, while also filtering out the top 30% of companies in their “compounder universe”. The team meet with companies across all sectors, with company meetings followed by analyst presentations. It should be noted that, in addition to a management team of five, Lazard also has an extensive desk of research analysts across the consumer, energy, industrials, health care, financials, information technology and communication services sectors.
The second stage is fundamental analysis – here the team ask a series of questions about each stock. These include how does a company generate high returns; the sustainability of those returns; will management invest cash to grow; and how long must the returns be sustained to justify the valuation? The aim is to find those long-term competitive advantages – these can come in many guises such as brand, regulatory barriers, scalability, strength of the network or being involved in a niche business.
The final stage is portfolio construction, which covers alpha isolation and diversification of risk, the latter being because the managers are keen for the portfolio to benefit from different drivers of returns. The final portfolio is high conviction at 40-50 names and turnover is relatively low at 10-15%, a reflection of the focus on quality and giving companies time to compound and generate long-term returns to investors.
Companies will be sold if management has lost confidence in the sustainability of the company’s productivity levels; valuations are no longer fully reflective of the company’s sustainable level of financial productivity; or when a better investment opportunity appears.
The trust also looks to deliver dividend growth over time, but the main target is capital growth by reinvesting money into their companies -thus reflecting the strategy of the companies they invest in.
Risk
In addition to the portfolio management team undertaking their own research into fundamental risks, the trust also uses an independent risk team and has a global risk management function, which reports directly to the CEO. They also have a dedicated risk manager assigned to all quality strategies at the firm – this manager gives the team regular reports on the likes of risk decomposition, attribution and liquidity. This dedicated manager will then have a discussion with the team on a monthly basis on what they believe are the main risks associated with the trust (the portfolio managers have the discretion on whether to take action on the risks the dedicated risk manager has highlighted).
ESG
ESG - Integrated
Lazard integrates ESG considerations into the fundamental analysis conducted on every potential company. The firm focuses on how ESG opportunities and risks may affect a company’s competitive advantage, the sustainability of that advantage, reinvestment opportunities and valuation.
The investment manager also has access to third-party data sources to augment this proprietary fundamental research. Lazard has also conducted its own research which indicates that compounders tend to have attractive environmental and/or governance attributes.
The trust typically has no exposure to high carbon emissions sectors – these include the likes of utilities, real estate, materials and energy. ESG is factored into the fundamental analysis stage of the investment process.
Gearing
The trust has historically used very low levels of gearing, but none since the new management team were appointed in October 2023. The trust may use borrowing of up to 30% of its net assets to support the investment strategy.
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