A lack of exposure to US tech giants Apple and Nvidia sees Mid Wynd International (MWY ) retiring manager Simon Edelsten bow out on a rare period of underperformance as Lazard gears up to take the helm.

Artemis manager Edelsten has run the trust since 2014, taking over from Baillie Gifford. He will hand the reins of the global equity trust to Lazard duo Barnaby Wilson and Louis Florentin-Lee in October.

His final annual results will no doubt be disappointing for the manager as a 5.6% increase in the total underlying return in the year to the end of June still fell far short of the 11.3% return from the MSCI All Companies World index.

The lag in the benchmark was driven by a lack of exposure to big technology names, specifically Apple and artificial intelligence (AI) player Nvidia.

Online services account for 17% of the portfolio and Edelsten said these stocks performed well, including Microsoft, Alphabet, Adobe, and Amazon.

‘Having no exposure to just two stocks – Apple and Nvidia – accounted for nearly half the year’s underperformance relative to the comparator index,’ said Edelsten.

‘Our view is that this shows the benchmark has become worryingly concentrated, with just a few very large companies dominating total returns. We prefer to keep the portfolio more balanced than the comparator index.’

Edelsten observed that the past year is not a reflection of his longer track record as manager and said over the past nine years ‘market conditions have been very good indeed and in the one moment of panic – the Covid outbreak in March 2020 – the portfolio’s resilience became apparent’. The portfolio has grown 192.6% under Edelsten’s guardianship versus a rise of 160.2% in the benchmark.

In nearly a decade the trust has grown from just £67m to £449m with no gearing and ‘a year’s dividends available in reserves’, he said.

The trust proposed a final dividend of 3.95p per share, which is an increase of 8.3% on the full year dividend and marked the fourth year in which distributions have exceeded inflation. Since 2019 the trust has seen its dividend rise from 5.83p  per share to 8.7p, an increase of 49%.

However, the combination of a challenging environment and the change of manager has led the trust’s discount to suffer.

Chair of the trust, Russell Napier noted there was ‘considerable pressure’ on trust discounts more generally but ‘Simon Edelsten’s departure and the ensuing change of investment manager may well have caused some investors to sell their shares’.

The board has a strict discount control policy to keep the share price within a band of plus or minus 2% to the net asset value. 

The discount has drifted outside the 2% discount mark this year and so the board has convened a general meeting for 8 September to increase its flexibility to buy back shares. 

However, Edelsten still believes he is handing the potfolio in ‘rude health’ with several of its elements generating strong returns during the period. 

Automation, which is a fifth of the portfolio, performed well as China reopened, while digital finances, which is 7% of the fund, also enjoyed a positive year, particularly the fund’s ‘small allocation to Japanese banks’.

‘These companies benefit from persistent – and in Japan’s case, reasonably modest – inflation,’ said Edelsten.

He said the digital finances theme includes stocks that are typically of lower value and is a ‘good balance’ to more expensive sectors, such as US technology.

In keeping with the performance of his themes, Edelsten (pictured) bought Japanese banks and Rockwell Automation over the year, and sold Elevance, one of the larger holdings in US medical insurance.