Potential resilience in a high-tariff environment: Mid Wynd International

Mid Wynd International (MWY) provides access to the Lazard Global Quality Growth strategy—a strategy historically reserved for institutional investors that has delivered annual returns exceeding those of the MSCI ACWI Index since its inception in February 2011. The managers, Louis Florentin-Lee and Barnaby Wilson, aim to build a Portfolio of 40 to 50 high-quality companies capable of sustaining high levels of financial productivity, underpinned by the belief that the market consistently underestimates the long-term potential of such companies, enabling them to outperform the market over the long term.

Louis and Barnaby have remained disciplined in their bottom-up approach since the beginning of the year, avoiding portfolio changes in response to the potential impact of tariffs. Instead, they have spread their exposure to the Magnificent Seven beyond Microsoft and Apple by adding Meta and reintroducing Alphabet. They believe the development of AI is unlikely to be a ‘winner takes all’ market, with each of these companies possessing distinctive attributes that could lead to success. Outside of technology, they have also added a range of highly profitable companies with attractive growth prospects, such as EssilorLuxottica, which is developing innovative products that could revolutionise eyewear, and Hilton Worldwide, which they argue may benefit from limited room supply and be better positioned than its smaller peers to grow its room count.

In addition, MWY increased its Dividend for a 12th consecutive year in 2024, securing the trust’s position among the AIC’s next generation of dividend heroes. MWY is trading at a 2% Discount at the time of writing, wider than its five-year average of c. 0.2%.

In our view, MWY presents a compelling option for investors seeking exposure to high-quality companies. Louis and Barnaby apply a disciplined investment approach, focussed on ensuring that the high financial productivity of the portfolio’s holdings can be sustained over the long term. We believe that such companies—often characterised by pricing power and high margins—could offer resilience if higher tariffs become established in international trade. They are generally better positioned to absorb higher costs without undermining their ability to reinvest for future growth, and may have the flexibility to adjust supply chains or build inventories quickly if needed. Moreover, many benefit from pricing power and may be able to pass additional costs on to customers without significantly disrupting demand.

While Louis and Barnaby’s approach has delivered strong results historically, it has faced challenges in the past few years including surging interest rates, narrow market returns and multiple de-rating, despite the portfolio delivering earnings growth comparable to the market. In our view, this may suggest a disconnect between market perception and underlying operational results, and we believe MWY’s performance could improve if the market refocusses on fundamentals.

In addition, we note that while quality companies have delivered stronger earnings growth than the broader market since 2022, their relative valuations have declined to historically low levels, which could boost returns if they revert to the mean. As a result, now could present an attractive entry point to gain exposure to a factor that has historically outperformed the broader market over the long term.