Falling inflation and a rate cutting cycle mean better times are ahead for Martin Currie Global Portfolio Trust (MNP), a collection of high-quality growth companies with strong cash flows and robust balance sheets managed by Zehrid Osmani.
Higher rates have whipped up headwinds for the long-duration growth stocks favoured by Osmani, a former Paris Saint-Germain Academy footballer with a proven record of successful stock picking during periods when the market’s focus is on company fundamentals over macroeconomic fluctuations.
The £241 million cap fund offers exposure to leaders and innovators at the forefront of multi-decade themes including AI (artificial intelligence), the rise of electric vehicles and the growth of the emerging market middle class.
Due to the board’s zero discount policy, Martin Currie Global Portfolio’s discount to NAV (net asset value) is modest at 2.6%, albeit slightly wider than the 12-month average, so don’t expect a massive re-rating.
Rather, investors should back Osmani’s ability to grow the NAV over time by selecting long-term winners, supported by the deep fundamental company and industry research he conducts with his team.
BUMP IN THE ROAD
One of the smaller trusts in the Association of Investment Companies’ (AIC) Global sector, Martin Currie Global Portfolio’s NAV total return of 4.4% for the six months to 31 July 2024 lagged the MSCI All Country World index’s 11.5% haul.
Only holding Microsoft (MSFT:NASDAQ) and Nvidia (NVDA:NASDAQ) of the ‘Magnificent Seven’ stocks which make up some 20% of the benchmark proved detrimental to performance.
Higher rates and the market rotation away from quality growth towards value have left the trust’s 10-year share price total return of 165.6% lagging the sector’s 246% and the returns delivered by the likes of Scottish Mortgage (SMT), Manchester & London (MNL) and Brunner (BUT).
Yet Shares sees the recent performance as a bump in the road, given Martin Currie Global Portfolio Trust has generated returns ahead of its benchmark since launch a quarter of a century ago and headwinds to Osmani’s quality growth style are abating.
Falling borrowing costs should boost the fund’s 31-company strong portfolio of high-quality, long-duration assets, and we are reassured by Osmani’s focus on companies with resilient earnings, pricing power, solid balance sheets and exposure to structural growth prospects.
Another tick in the box is the manager’s valuation discipline, reflected in a significant underweight exposure to the frothy-looking US market and an overweight to Europe, where Osmani sees ‘more valuation support’.
STRUCTURAL GROWTH EXCITES
‘Whilst we realise the weak short-term relative performance will be disappointing to our shareholders’, wrote Osmani at the half-year results in October, ‘we remain confident that the exposures we have in the company are enabling us to harness attractive structural growth opportunities across themes which we favour.’
The fund bundles eight mid-term themes into three broad areas: energy transition, ageing population and artificial intelligence. Osmani tells Shares AI is ‘an opportunity that remains underestimated by the market, both in terms of its potential and the speed at which it is going to be taken up’, a bullish view expressed through the likes of Microsoft and semiconductor holdings including Nvidia, with shares in the latter testing all-time highs at the time of writing.
Health care, the trust’s second largest sector exposure at last count, includes names such as Sartorius Stedim (DIM:EPA), a provider of innovative equipment for the pharmaceutical and biotechnology industries, as well as Wegovy weight-loss drug maker Novo Nordisk (NOVO-B:CPH), bought earlier this year on share price weakness and after Osmani had revised its obesity addressable market potential ‘quite sizeably up’.
Other exciting top 10 positions include luxury supercar maker Ferrari (RACE:NYSE), Swedish industrial star turn Atlas Copco (STO:ATCO-A) and Moncler (MONC:BIT), the Italian luxury fashion brand backed by industry leviathan LVMH (MC:EPA).
Another key holding is French personal care powerhouse L’Oreal (OR:EPA), currently outperforming its US counterpart Estee Lauder (EL:NYSE). The trust has a reasonable ongoing charge of 0.64% and there is no performance fee to complicate cost considerations for investors.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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