A version of this article was first published in the Telegraph’s Questor column last Thursday.

With investors fretting about whether the unprecedented stock-market run of US technology giants can last, it’s time to find a fund taking a broader approach to growth investing.

One such is Mid Wynd International (MWY ) investment trust, which shocked shareholders in June last year by appointing Lazard to replace Artemis as fund manager, a move that prompted analysts and investors to review their positions and ratings.

The uncertainty was accentuated by the strong performance of Artemis’ Simon Edelsten and Alex Illingworth. Since taking over from rival Baillie Gifford in May 2014 the managers had generated a 184% share price gain, beating the 160% rise in the MSCI All Country World index.

The decision to hire Lazard came four months after Artemis revealed that Edelsten and Illingworth were leaving (they reunited last week at Goshawk Asset Management, a new firm that does not yet have an investment trust).

News of their departure from Artemis prompted an unimpressed Mid Wynd board to look elsewhere. Could the good performance continue amid this turbulence, investors wondered, looking at the many other global equity trusts trading on cheap discounts as options.

Fifteen months later, investor fears have not been realised. After a wobble, Mid Wynd shares avoided falling to a big gap to asset value as its board actively bought back shares. Over their first year the new managers have delivered a total return of 13%, a sign that Lazard’s Louis Florentin-Lee and Barnaby Wilson are doing a good job in finding large, good-quality growth stocks. 

While the pair have not beaten their benchmark in their first year in charge, with the 42-stock portfolio’s gain trailing the 19.9% advance in the MSCI index, they can point to a successful track record, like the Artemis managers.

At the time of their appointment, a global fund they ran for institutional investors from February 2011 had beaten the MSCI index by 2.4% a year, an impressive margin of outperformance. 

Their strategy is to invest in ‘compounders’, or exceptional companies with competitive advantages that enable them to generate high returns on capital, a big proportion of which they reinvest in their businesses rather than pay to shareholders in dividends. 

While that leaves Mid Wynd on a meagre 1% dividend yield that won’t impress income seekers, the focus on financial productivity is a boon for growth investors wishing to avoid bubble stocks. ‘It’s better to focus on earnings rather than sentiment in the market,’ said Wilson.

A discipline of not overpaying is underpinned by picking companies whose long-term earnings power is not fully recognised by the market. Businesses that go on to ‘beat the fade’ and maintain high profitability longer than other investors think are very valuable, the managers say.

Mid Wynd’s 12-month underperformance is partly explained by not holding two of this year’s best Magnificent Seven stocks – Nvidia, the chipmaker leading the AI revolution, whose shares have soared 243%; and Facebook-owning Meta Platforms, which has stunned with a 96% surge.

Nevertheless, with 29% in IT stocks and 62% in the US, this is no anti-tech fund. The biggest holding, at 5.3% of assets, is Microsoft'>Microsoft, a ‘Mag7’ stock whose ‘ongoing ability to deploy capital at attractive rates’ in software, cloud computing and AI delights the managers.

Other well-known tech stocks include Alphabet'>Alphabet, owner of Google, and Taiwan’s TSMC, whose foundries make chips for Nvidia and others.

Less familiar additions are Cadence Design Systems '>Cadence Design Systems (CDNS.O), a US company whose software enables semiconductor manufacturers to design and test their complex products; and VAT Group '>VAT Group of Switzerland (VACN) whose valves create the vacuum conditions essential for depositing minute quantities of silicon on circuit boards.

The managers also found space to bring in Diageo '>Diageo (DGE), the alcoholic beverage brand, while it was on a recent four-year low after a profits warning. They have also been long-term holders of Dollarama (DOL.TO), the Canadia discount retailer and a ‘classic’ compounder.

‘Stocks don’t have to be sexy to be good businesses and generate great returns for shareholders,’ says Florentin-Lee.

I agree. Having learned more about the managers’ philosophy, this looks like a worthy fund to put on a watchlist, although investors might want to hold off buying until after the US election, which could destabilise markets in the short term.  

Key facts

Closing price: 785p
Market value: £366m
Year of listing: 1981
Discount: 2.4%
Average discount over past year: 2%
Yield: 1%
Most recent year’s dividend: 8p (June 2024)
Gearing: Nil
Annual charge: 0.6%