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Martin Currie’s Osmani boots out Unilever over Africa governance concerns

16 September 2020

Manager of Martin Currie Global Portoflio Zehrid Osmani ditched six stocks this year, including Unilever after he was unhappy with how it handled problems in Nigeria and Ghana.

Martin Currie Global Portfolio (MNP ) fund manager and former footballer Zehrid Osmani has given Unilever (ULVR) the red card over governance concerns in its African operations. 

Osmani, who was a Paris Saint-Germain Academy footballer in his youth, ditched six stocks in the six months to 31 July, including consumer goods giant Unilever, even though its business benefited from consumers buying more cleaning and hygiene-related products during the coronavirus pandemic. 

However, Osmani has been less than impressed by the company’s corporate governance, a theme which has gained more traction among the fund management industry in the wake of the Covid-19 oubreak. 

The manager of the £285m closed-ended fund ‘engaged extensively’ with Unilever after it issued a profit warning at the end of 2019 and he was ‘alerted to governance issues within two of their key west African geographies - Nigeria and Ghana, both of which are separately listed’. 

Senior officers in these divisions were dismissed but Osmani said further engagement in February to ‘understand where its internal reporting procedures had failed to pick up and audit material supply chain distribution issues’ raised further questions about ‘internal control functions’ at the group and he exited the position. 

Osmani has also sold specialist insurer Beazley (BEZ) as it is at risk of becoming ‘a value trap’ as the pandemic means the ‘next 18-24 months bring material uncertainty’. 

Engineering group Spirax-Sarco (SPX) was sold after reaching Osmani’s target price and ‘we struggled to find more upside’ and the position in US laboratory instrument maker Waters (WAT.N) was exited as it missed Osmani’s ‘growth signpost’.

Finally he exited Align (ALGN.O), which makes 3D digital scanners, as ‘we believed there were question marks around the size of its “competitive moat” as well as increased competition as capital continues to be attracted to this high growth space’. 

The changes to portfolio have seen the trust outpace its MSCI All Countries World benchmark, delivering a net asset value total return of 8.4% in the half year compared to a 0.2% gain for the index. The best performer was Masimo (MASI.O) as there has been strong demand for its patient monitoring devices during the Covid-19 crisis.

Keeping with the healthcare theme, Osmani added two healthcare-related stocks to the portfolio in the first half. He purchased a position in Veeva (VEEV.N), which provides software for drug development and commercialisation. 

Osmani said ‘serving a regulated end-market with mission-critical products provides high barriers to entry’.

‘We estimate that Veeva is only 5% penetrated in its market opportunity, which is growing due to the structural trend towards more complex and personalised therapeutics which require greater coordination between agents across the healthcare system,’ he said. 

Illumina (ILMN.O), a developer of systems to analyse genes, has also been added to the portfolio as Osmani believes its continued innovation should allow it to sustain growth in the ‘teens’ for over a decade.

Osmani predicted a ‘gradual economic recovery’ rather than a V-shaped one, and a ‘possible return to previous activity levels only by 2022’ as the bulk of earnings downgrades have now filtered through. 

It is nearly two years since Osmani took over the trust after the retirement of Tom Walker. Since then the NAV has grown 32.2% compared to 15.8% in the index, an outperformance that analyts at Numis Securities said reflected the manager’s move to a higher-conviction portfolio of 30 rather than 47 stocks, chosen from three broad themes of health, resource scarcity and technology, areas that had all done well. 

Investment company news brought to you by Citywire Financial Publishers Limited.


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