#1 The manager follows a disciplined, bottom-up stock selection process
Osmani has an unconstrained, high-conviction approach and invests with a long-term, five- to 10-year horizon. There is a systematic three-step investment process:
1) Idea generation: the total universe of around 2,800 listed global stocks is screened down to an investible universe of around 500 companies and then a research pipeline of 90+ names is prioritised to identify companies with a combination of quality, sustainable growth and an attractive valuation.
2) Fundamental analysis is based on eight key criteria: industry analysis, a company’s growth drivers, returns, financial strength, accounting, corporate ethos, ESG profile and valuation. A proprietary research template is compiled for companies reviewed, and each is given a conviction rating between 1 (strong buy) and 5 (sell).
3) Portfolio construction: each position is weighted appropriately, aiming to ensure a meaningful contribution to returns. To better understand exposures and risks, additional research is undertaken to analyse geographic sources of revenues and profit. Companies are also assessed in terms of end-user exposure at a tier one level – the consumer, business and government – and then at a more detailed tier two level focusing on individual sectors and industries.
Stocks may be sold when they have reached their price target or if there are higher-conviction opportunities elsewhere.
#2 ESG is a very important element of the investment process
The manager strongly believes that including ESG analysis in investment decisions delivers improved returns for MNP’s shareholders and it is integrated throughout the proprietary investment process. More than 50 underlying criteria are assessed to capture the complexity of ESG risks facing a company’s long-term growth outlook and sustainability.
#3 A high-conviction, straightforward equity portfolio
MNP is a straightforward equity fund with no unlisted businesses or derivatives. The portfolio has around 30 holdings, with the largest 10, across a range of industries, making up more than 50% of the fund. Four of the 11 market sectors have a zero weighting in the portfolio as these companies do not meet the manager’s long-term quality growth criteria. These include fossil fuels, weapons manufacturers and mining companies.
Osmani focuses on three mega-trend growth themes: the future of technology, resource scarcity and demographic change. Within this framework, three areas currently have meaningful representation in the portfolio – artificial intelligence, energy transition and healthcare solutions for an ageing global population.
The manager has remained disciplined and is confident that the trust’s relative performance will continue to improve following a period when growth stocks devalued in a rising interest rate environment.
#4 MNP has a stable dividend and a zero-discount policy
The annual dividend has been maintained at 4.20p per share for the last seven financial years and there are quarterly distributions (three interim payments of 0.90p per share and a fourth interim payment of 1.50p). In June 2022, MNP’s shareholders approved the payment of dividends from realised capital gains. At the end of FY23 (ending 31 January), the trust held distributable reserves equivalent to around 49x the annual dividend.
MNP’s board employs a zero-discount policy aiming to ensure that, in normal market conditions, the trust’s shares trade close to NAV. In an environment of wider-than-average investment trust discounts, MNP’s shares are repurchased on most trading days.
