Mid Wynd International Investment Trust update

Simon Edelsten and Alex Stanić, managers of the Artemis Mid Wynd International Investment Trust, report on the fund over the quarter to 30 June 2023 and their views on the outlook.

The Company's net asset value (NAV) increased by 1.5% on the quarter, lagging the 3.3% rise in the benchmark MSCI AC World Index.

Inflation continued to fall gradually in the US, as higher interest rates, quantitative tightening and tougher bank lending conditions took effect. However, economic data points have showed resilience (particularly high employment) and therefore the likelihood of a ‘soft landing’ is growing. As a result, consumer discretionary, industrial and materials/energy sectors led global markets higher, whilst utilities, healthcare and consumer staples (historically defensive sectors) lagged.

Global equity markets have recently been driven by large-cap tech stocks. Not owning Apple, Nvidia or Meta detracted from Mid Wynd's performance during the quarter. Our overweight to healthcare also held us back. 

Activity

We sold hearing aid manufacturer Sonova (losing market share and a key customer contract) and mining equipment company Epiroc. In technology, we bought Intel (which is a beneficiary of US CHIPS Act) and LAM Research.

Elsewhere we added to Estée Lauder as it is exposed to secular growth in sales of premium beauty products, and fragrance adoption in Asia. Recent headwinds in China have led to some inventory challenges and these have weighed on its share price.  We expect these issues to be resolved over coming quarters; in the meantime this offers an attractive buying opportunity for a longer-term investor.

We reduced the holding in Accenture as the near-term outlook for consulting projects weakens, although we continue to like its best-in-class business model and growth dynamics. We also trimmed Salesforce, which has performed well over the year to date as the margin expansion story has played out successfully.

The Company's portfolio remains underweight in the US and overweight Japan and Europe, where we have found better value for money this year. The portfolio is modestly overweight healthcare (a sector which has underperformed year to date) as we are attracted to its secular growth drivers. 

Outlook

Markets have been driven higher by a narrow group of technology stocks this year. Seven stocks make up 50% of the global index's (the MSCI ACWI) performance year to date (in US dollars). Defensive areas of the market such as healthcare and consumer staples have lagged, despite higher interest rates and still elevated inflation. The portfolio remains balanced, with holdings across growth-sensitive and more defensive sectors, which should benefit in the event that economic conditions deteriorate.

There is a greater-than-usual degree of divergence between economies currently, with the US, Europe, UK, China, Japan and emerging markets all at different stages of the economic cycle. The US appears resilient for now. Japan remains differentiated: having had a total absence of inflation for many years, it is more tolerant to its return. 

While the reopening recovery in China has so far been slower than expected, the government will likely respond to a challenged property market and high youth unemployment with stimulus programmes. Even so, animal spirits should return eventually and benefit our Japanese stocks, as well as our holdings in luxury and consumer goods companies.

Change of investment manager 

On 27 June 2023, the Board confirmed that it had undertaken a review of the Company's investment management arrangements. Following this review, the Board announced that it intends to appoint Lazard Asset Management LLC as the Company's alternative investment fund manager ("AIFM") and Lazard Asset Management Limited as its investment manager (together "Lazard"). Subject to completion of contract and relevant FCA notifications, it is expected that Lazard be appointed as the Company’s alternative investment fund manager with effect from Q4 2023.

Past performance is not a guide to the future.
Source: Lipper Limited/Artemis from 31 March to 30 June 2023.
All figures show total returns with dividends and/or income reinvested, net of all charges.
Performance does not take account of any costs incurred when investors buy or sell the fund.
Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class.
Benchmarks: MSCI AC World NR; A widely-used indicator of the performance of global stockmarkets, in which the company invests. It acts as a ‘comparator benchmark’ against which the company’s performance can be compared. Management of the company is not restricted by this benchmark.

Investment in a fund concerns the acquisition of units/shares in the fund and not in the underlying assets of the fund.

Reference to specific shares or companies should not be taken as advice or a recommendation to invest in them.

For information on sustainability-related aspects of a fund, visit the relevant fund page on this website.

For information about Artemis’ fund structures and registration status, visit artemisfunds.com/fund-structures

Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.

Any statements are based on Artemis’ current opinions and are subject to change without notice. They are not intended to provide investment advice and should not be construed as a recommendation.

Third parties (including FTSE and Morningstar) whose data may be included in this document do not accept any liability for errors or omissions. For information, visit artemisfunds.com/third-party-data.

Important information
The intention of Artemis’ ‘investment insights’ articles is to present objective news, information, data and guidance on finance topics drawn from a diverse collection of sources. Content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or investment by Artemis or any third-party. Potential investors should consider the need for independent financial advice. Any research or analysis has been procured by Artemis for its own use and may be acted on in that connection. The contents of articles are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. Any forward-looking statements are based on Artemis’ current opinions, expectations and projections. Articles are provided to you only incidentally, and any opinions expressed are subject to change without notice. The source for all data is Artemis, unless stated otherwise. The value of an investment, and any income from it, can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested.