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42. Uncovering Trusts – Franklin Global Trust: An exciting new chapter in the trust’s life
96 Plays21 days ago
In this episode, our director of content, investment trusts Milosz Papst provides an update on Franklin Global Trust, which was formerly the Martin Currie Global Portfolio Trust and featured in one of our October 2024 podcasts. Martin Currie’s parent Legg Mason was acquired by Franklin Templeton Investments in July 2020, but the brand was only retired earlier this year. The trust’s manager Zehrid Osmani and his team combined with the much larger US-based Franklin Equity Group and Jonathan Curtis was appointed as co-manager. Milosz then discusses Franklin Global Trust’s objective and investment process before explaining what it offers investors. He highlights that the trust is a straightforward equity portfolio with no unlisted businesses or derivatives, and is relatively concentrated, with around 30 holdings. Following on, he discusses the trust’s geographic and sector positioning and some of its larger holdings. He then focuses on performance, which has been disappointing in recent years due to the trust’s focus on growth stocks, which derated in a rising interest rate environment, and also there was insufficient exposure to the ‘Magnificent Seven’ large-cap technology stocks. However, over the longer term, the growth strategy has proved successful and during the dip in performance the managers have made improvements to the investment process. Finally, he discusses the trust’s dividend and its significant distributable reserves, and the zero-discount policy, which means that there are share buybacks on most trading days.
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About ‘Uncovering Trusts’
'Uncovering Trusts': is a podcast run by Edison analysts released every two weeks. Subscribe to hear analyst interviews on how investment trusts maximise returns while managing risks for investors.
About Edison:
Edison is a content-led IR business. We believe quality investment content should inform all investors, not just brokers. Our mission: engage and build bigger, better-informed investor audiences for our clients.
Edison covers 50+ investment trusts, read about them here: https://www.edisongroup.com/equities/investment-companies/
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Transcript
Introduction and Welcome
00:00:06
Speaker
Welcome to Uncovering Trusts, a podcast by Edison Group. I'm your host, Will Manuel, and today I'm joined by Milos Pabst, Director world Investment Company Content at Edison, who will talk about Franklin Global Trust, whose ticker is FRGT.
Discussion on Franklin Global Trust
00:00:20
Speaker
Milos, thanks for joining us today. Thanks, Will. I'm looking forward to revisiting this trust. Great. So a good place to start is to discuss what's changed over the last year.
Renaming and Takeover by Franklin Templeton
00:00:31
Speaker
Sure. um First thing is the company name.
00:00:33
Speaker
The Franklin Global Trust was the Martin Kerry Global Portfolio Trust until April 2025. To provide some background, Franklin Templeton Investments took over Martin Kerry's parents, Black Mason, in July 2020.
00:00:48
Speaker
um But the Martin Kerry brand was only retired this year.
Management and Merger Details
00:00:53
Speaker
ah The trust was launched in March 1999 and since October 2018 has been managed by Zehri Dosmany, who was head of Martin Kerry's global long-term unconstrained investment team.
00:01:05
Speaker
On the 12th of July 2025, it was combined with the Franklin Equity Group, a much larger team of around 65 investment professionals, and its CEO, Jonathan Curtis, became co-manager of Franklin Global Trust.
00:01:20
Speaker
ah Franklin Equity Group is a large US asset manager. um At the end of 2024, had more than billion dollars of assets under what What is the trust's objective and how do the managers seek to achieve this?
Investment Strategy and Goals
00:01:34
Speaker
Yes, so the trust aims to achieve long-term returns in excess of the total return from the MSCA All Country World Index. um While the enlarged investment team brings a more extensive research capability, ah the fundamental strategy has been maintained based around the philosophy that equity markets undervalue sustainable growth companies that can deliver long-term value for shareholders.
00:01:58
Speaker
Essentially, the managers are looking for high quality growth opportunities at some sensible prices. ah Franklin Equity Group is based in Silicon Valley, which, of course, is a major center of global innovation, ah which I believe should so enhance the team's ability to seek out these types of companies, ah particularly in rapidly evolving sectors such as technology and healthcare.
00:02:23
Speaker
Okay, so and let's spend a bit more time um and more detail about the investment
Portfolio Construction and Holdings
00:02:29
Speaker
process. Okay. um In practice, the managers run a high-conviction portfolio of 25 to 40 quality global growth companies with um superior share price appreciation potential based on ah projected return on investor capital, balance sheet strength, and sustainable business models.
00:02:48
Speaker
um They invest with a 5-10 year investment horizon based around three steps. um The first step is idea generation. The total universe of around 2,800 listed global stocks is screened down to an investable universe of around 500 companies. And then a research pipeline of 90 plus names is prioritized to identify companies with a combination of quality, sustainable growth, and an attractive valuation.
00:03:17
Speaker
The second step is fundamental analysis, which is based on eight key criteria. Industry analysis, a company's growth drivers, returns, financial strength, accounting, corporate ethos, ESG profile, and valuation. The proprietary research template is compiled for companies reviewed, and each is given a conviction rating between one, which is strong buy, and it's five, which is sell.
00:03:41
Speaker
And then finally, portfolio construction. Each position is weighted appropriately, aiming to ensure a meaningful contribution to returns while taking risk into account. I would note that the managers strongly believe that including ESG analysis in investment decisions delivers improved returns for the trust shareholders and it is integrated throughout the proprietary investment process.
00:04:03
Speaker
um More than 50 underlying criteria are assessed to capture the complexity of ESG risks facing a company's long-term growth outlook and sustainability.
00:04:14
Speaker
Okay, so taking the philosophy and process into account, what does the resulting portfolio offer investors? The Trust is straightforward equity portfolio with no unlisted businesses or derivatives.
00:04:27
Speaker
It is relatively concentrated with around 30 holdings. um Although these are diversified by geography and sector, there are three out of 11 areas of the market with a zero waiting. There are no energy, real estate or utility stocks as so these companies do not meet the managers' long-term growth criteria.
00:04:48
Speaker
Investing companies are likely to be beneficiaries of one of three megatrend growth themes. ah The future of technology, resource scarcity, and demographic change. ah The largest sector weightings are technology, which makes up around a third of the portfolio, followed by healthcare, care which makes up around a further quarter.
00:05:07
Speaker
Now, in terms of significant active positioning versus the benchmark, there are approximately 15 percentage points and 8 percentage points overweight positions in healthcare technology, respectively, and an 8 percentage points underweight in financial stocks.
00:05:21
Speaker
But healthcare, as we know, is an unloved sector these days, which the managers believe has the potential to perform relatively better. um Despite the sector currently being under pressure from political risks, it has favorable demand and earnings growth characteristics and also has valuation support.
00:05:38
Speaker
and Within the Trust's healthcare holdings are different categories, um stable growth such as AstraZeneca, defensive growth in animal health names IDEX and zoetes, and R&D-driven growth, including Metla Toledo.
00:05:55
Speaker
Okay, so ah turning to um the geographic exposure, can you give us some details on that?
Current Holdings and Notable Companies
00:06:01
Speaker
ah Well, unsurprisingly, given its dominance in global indices, the Trust's largest country allocation is the US at around 60%, which is around 5 percentage points less than the index weighting.
00:06:13
Speaker
ah The most notable difference is Europe, where the Trust is about 20 percentage points overweight versus the index, as the region is considerably less expensive than the US. s The trust also has around 12 percentage points underweight to Asian exposure.
00:06:28
Speaker
Okay. and Can you highlight some of the largest portfolio positions? Yes, of course. um The top 10 holdings make up around half of the portfolio. Within this are some well-known US large-cap technology companies, including Microsoft and NVIDIA, and consumer names such as French personal care company L'Oreal and Italian luxury sports car manufacturer Ferrari.
00:06:51
Speaker
There are also some businesses that may be less familiar, such as ResMed, which is a US-based but Australia-funded manufacturer of medical devices and software applications to diagnose, treat and manage um ah respiratory disorders.
00:07:06
Speaker
And Viva Systems, which provides cloud-based software for the life sciences industry. And ah given the trust growth bias, are I guess a discussion about performance is in order.
Performance Challenges and Enhancements
00:07:19
Speaker
Indeed. As you may have suspected, in recent years, the trust performance has been disappointing, a large part of which is down to owning growth stocks that derated in a rising interest rate environment.
00:07:31
Speaker
Also, the trust relative performance was due to um having insufficient exposure to the magnificent seven large cap technology stocks, which investors seem to well view as the only game in town.
00:07:42
Speaker
However, over the long term, the in-depth fundamental stock selection approach has been a winning strategy. The managers are optimistic that with the broader stock market leadership and the return to focusing on company fundamentals rather than share price momentum, the trust can return to fall.
00:07:59
Speaker
but Nevertheless, the managers have continued to make improvements to the investment process. ah Given disappointing results in 2024, there's now more efficient screening to provide an early indication of earnings and share price trends.
00:08:12
Speaker
ah There is an increased focus on earnings risk assessment, both in terms of short and long-term risks, as well, avoiding risk avoiding earnings misses can obviously greatly improve performance.
00:08:23
Speaker
Also, there is a heightened emphasis on key thesis indicators, which provide a timely identification of um operational deviations away from the co-investment thesis. along with the sharp and sell discipline, which involves a faster and lower tolerance review of stocks on a so-called hospital list.
00:08:41
Speaker
Okay. um And before we finish today, are there any other points for our listeners to consider?
Income and Trading Policy
00:08:47
Speaker
Just a couple. ah Firstly, dividends. Income is not a major feature of this trust as there has been a 4.20 pens per share annual distribution for the last nine financial years.
00:08:57
Speaker
There are considerable distributable reserves of around 60 times the annual dividend payment, which can be drawn on when required. um Secondly, since 2013, the Trust Board has employed a zero discount policy aiming to ensure that normal market conditions, shares trade close to NAV.
00:09:16
Speaker
And this has been an effective program and shares are bought back on most trading days. Okay, well, that that about wraps this session up. Thanks for the catch up on this high quality global equity fund.
00:09:28
Speaker
It will certainly be interesting to follow the portfolio the lives of the broader investment team and enhancements being made on the performance front.
Conclusion and Call to Action
00:09:36
Speaker
ah You've been listening to Uncovering Trust, a podcast by Edison Group.
00:09:39
Speaker
If you want to find out more about FRGT and other investment companies we cover, please visit www.edisongroup.com.