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Monks Investment Trust: Positioned for long-term growth
By Dzmitry Lipski | Thu, 21st September 2017 - 08:43
Launched in 1929, Monks Investment Trust (MNKS) has been managed by Baillie Gifford for around 80 years, and previous manager Gerald Smith ran the portfolio for a decade.
Since March 2015, however, the trust has been managed by the Baillie Gifford Global Alpha team, which comprises three highly experienced managers: Malcolm MacColl, Spencer Adair, and Charles Plowden.
The trust is part of a large strategy of over £15 billion the trio has successfully managed since 2005, using stock fundamentals to pick global companies with competitive advantages and superior business models. Each should offer above-average profit growth over the long term, they say.
A diversified global portfolio of growth companies provides exposure to four growth categories: stalwarts, rapid, cyclical and latent growth.
Stalwarts are typically durable franchises with robust profitability and competitive advantages; rapid growth companies tend to be early-stage businesses with vast growth opportunities; cyclical growth companies are those subjected to macroeconomic and capital cycles; and latent growers are companies where earnings growth tends to accelerate over time driven by a catalyst.
The portfolio is usually very different from its benchmark, the FTSE World Index, with an active share in excess of 90%, but well diversified across regions and sectors. At present there are more than 100 holdings in the portfolio. The largest allocations are in North America with 43% and, at sector level, in Financials (27%) and Consumer Services (22%).
Since the team took over management of the trust, it has outperformed its benchmark by 12.4%, but is slightly behind its peers. The trust has a strong performance track record, beating its benchmark year-to-date, over one and three years. It is currently trading at a discount of 1.6%, significantly lower than the 14% recorded when BG's Global Alpha team took over.
While managers acknowledge exceptionally strong performance over the year, they expect lower returns going forward. The trust has benefited from exposure to 'disruptive technology' stocks such as Amazon (AMZN), Alphabet (GOOGL), Alibaba (BABA), Samsung and Facebook. (FB)
The managers view them as 'economically agnostic' companies that should grow regardless of general economic developments.
In contrast, more economically sensitive stocks focused on the Asian and emerging markets consumption story have proved a drag. Performance is also helped by gearing at 6%. This is one of the cheapest trusts in the sector with ongoing charges of 0.59%.
Despite the gloomy focus of much media coverage, the global economy is enjoying its most rapid expansion for many years, argue the trust's managers.
US consumer confidence is at its highest level since the year 2000, the European economy is recovering strongly and, as another sign of improving confidence, government bond yields have risen in many countries. As long-term global growth seekers, they continue to fund many investment opportunities.
The trust is an attractive offering for investors looking for a low-cost, well diversified global portfolio of growth stocks that benefit from highly experienced management team with a strong long-term track record.
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
|MONKS INVESTMENT TRUST PLC ...||781.00p||0.45%|
|ALIBABA GROUP HOLDING LIMITED||$189.84||-0.56%|
|SAMSUNG ELECTRONICS CO LTD ...||$1,287.00||0.63%|
|All data 15min delayed as of: 01:29:54 23/11/17|