Manchester & London Investment Trust [LON:MNL] is the top performer over one year in the Association of Investment Companies (AIC) Global sector with a +80.5% return (on a share price total return) against a sector average of +25.1%.
The GBP370m company is not a member of the AIC, but is still a constituent of the Global sector. The fund aims to achieve capital appreciation by investing in a diversified portfolio, comprising any of global equities and/or fixed interest securities and/or derivatives and is benchmarked against the MSCI UK IMI Index (GBP).
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Founded in 1972, the fund unabashedly has a technology bent with the managers, M&L Capital Management claiming: “[…] The returns of stock market indices focused on technology have outperformed the traditional equity markets in each discrete decade performance.”
Lead fund manager is Mark Sheppard, a chartered accountant, formerly of Deloitte and ABNAmro Hoare Govett, and is assisted by Richard Morgan and Brett Miller.
The Technology Revolution
The fund’s investment philosophy is based on the manager’s argument that ever since the Industrial Revolution, entrepreneurs have been investing in the R&D of machinery to improve the productivity that manpower alone can provide.
This, they argue, has continued in the Technology Revolution, where telecommunications, computers, sensors, robotics and software are the modern versions of the steam engine, spinning jenny and power loom, and are improving levels of economic and industrial productivity. The managers argue that modern technology, and the innovators behind the tech, can though their technology create excess economic value and quickly become economically dominant globally.
The portfolio reflects the philosophy in that it is dominated by brand-name technology giants, with the managers doubling-down on their long-only principles with the recent success of Nvidia NASDAQ:NVDA claiming: “Shorting the future, leads to pain.”
The company is very bullish on AI and its potential to disrupt software, and argue that the birds are coming home to roost with recent underperformance of application software firms like Salesforce NYSE:CRM, ServiceNow NYSE:NOW, and Intuit NASDAQ:INTU damaged by slowing economic growth and higher interest rates, which affected them at the point when AI is just starting to gain momentum. Sheppard believes that these ‘old school’ application software companies are starting to see their markets being eroded by AI add-on competitors, and their business models – more mature than AI – are diverting money away from R&D to pay dividends and management, as opposed to radically innovating, developing and improving their products.
Not scared by concentration
The managers are not scared to back their philosophy, it is very concentrated in two names, with 57.2% of the fund invested in two names: Nvidia NASDAQ:NVDA and Microsoft NASDAQ:MSFT and wholly large-caps.
Top five holdings as at 31st May 2024
| Investment | Weighting |
| Nvidia NASDAQ:NVDA | 32.3% |
| Microsoft NASDAQ:MSFT | 24.9% |
| Advanced Micro Devices NASDAQ:AMD | 7.8% |
| ASML Holding [AMS:ASML] | 6.7% |
| Arista Networks NYSE:ANET | 5.6% |
Source: M&L Capital Management
You can’t knock the fund’s performance as a flash-in-the-pan, as it has not only been top performer over one year, but is top in sector over five years, with a return of +75.1% against a sector average of +53.1% and over 10 years returned +313.1%, second place in a sector that had an average return of +238%.
M&L has a discount to premium of -15.09% and a five year dividend growth of 3.13%. The fund has an ongoing charge of 0.54% p.a.
Manchester & London Investment Trust’s unwavering focus on technology has paid off. The fund boasts impressive performance over one, five, and ten years, solidifying its position as a top performer in the AIC Global sector. Led by Mark Sheppard and his team, M&L Capital Management, the trust heavily invests in tech leaders like Nvidia and Microsoft, anticipating continued disruption from AI and advancements in the technology revolution. While the portfolio’s concentration carries inherent risk, the trust’s track record suggests their strategy is well-positioned to capitalize on long-term trends.
