Franklin Global Trust (formerly Martin Currie Global Portfolio Trust) has released its annual results for the year to 31 January 2025, marking a pivotal year in its evolution. The trust delivered a NAV total return of 7.3% and a share price total return of 10.1%, both in positive territory, but underwhelming when compared to the MSCI All Country World Index, which returned 23.7% over the same period.

While absolute returns were positive and the trust continued to trade close to NAV thanks to its zero-discount policy, the underperformance against the benchmark prompted action from the board. A rebranding to Franklin Global Trust reflects deeper integration with Franklin Templeton, a move the board and manager believe will enhance research capabilities, improve performance, and increase shareholder value over the long term.

A year of transition: rebrand, fee cut and team integration

The trust celebrated its 25th anniversary in September 2024 and Chairman Christopher Metcalfe acknowledged that while long-term returns have been strong, the underperformance this year could not be ignored. The trust has undergone a significant transformation:

• Rebranded as Franklin Global Trust plc, the name reflects the closer alignment with Franklin Templeton and a more globalised investment process.
• Fee reduction: From 1 March 2025, the investment management fee has been cut from 0.45% to 0.40% of NAV (excluding income), supporting a more competitive ongoing charges ratio (now 0.65%).
• Team expansion: Portfolio manager Zehrid Osmani and his nine-person team are now part of the Franklin Equity Group, working alongside 65 investment professionals globally across offices in Edinburgh, London, New York, and San Mateo.
• The trust removed its £10m debt facility in November 2024, de-gearing the portfolio in light of market uncertainty and in support of the zero-discount policy.

Investment approach: conviction-led, long-term growth focus

Franklin Global Trust maintains a concentrated portfolio of 25–40 stocks, selected on a bottom-up basis with an emphasis on quality growth companies that are expected to outperform over the long term. The manager does not seek to mirror the benchmark and is prepared to diverge meaningfully from index weightings, which has both advantages and risks.

In this financial year, the approach faced challenges. Specifically, an underweight position in US equities – particularly painful in a year when the US outperformed strongly, buoyed by AI optimism and a Trump-led market rally; an overweight position in Europe, which struggled relatively; and limited exposure to the ‘Magnificent 7’ – despite owning Nvidia and Microsoft, the trust lacked full participation in the mega-cap tech surge that drove index returns.

While this positioning contributed to relative underperformance, Osmani remains committed to his valuation discipline, noting that many of the high-growth US names now trade at historically stretched valuations, and that opportunities in Europe and other regions offer better long-term value.

Portfolio changes: adjusting to structural shifts

The trust made several key portfolio adjustments over the year, aiming to strengthen exposure to emerging themes while trimming holdings where conviction weakened. Additions included: Apple and Meta Platforms, adding depth to the trust’s AI-related exposure; BE Semiconductors (BESI) and Constellation Software, reflecting belief in structural tech and software trends; Partners Group, to tap into long-term private asset growth; and Consumer-focused stocks like Deckers and Chipotle, offering brand strength and secular growth.

Exits and reductions included: Nike, Adobe, and Estée Lauder, where performance, earnings outlooks, or competitive dynamics deteriorated. There were also performance drivers and detractorssome holdings, including Croda and Pernod Ricard, that were trimmed or sold on concerns over valuation or sector outlook.

Performance drivers and detractors

Top contributors to performance included: Nvidia, a standout performer whose AI leadership and new chip developments (e.g., Grace-Blackwell Superchip) helped maintain momentum; Adyen, which rebounded following prior weakness, reinforcing belief in its pricing discipline and market-leading tech; and Constellation Software, rewarded for disciplined M&A and steady capital allocation.

Detractors included: Novo Nordisk, impacted by mixed weight-loss drug trial results; along with Estée Lauder and L’Oréal, both hit by sustained weakness in China and broader Asian markets, alongside increased competition and foreign exchange headwinds.

The trust’s high healthcare weighting also hurt relative performance, with post-COVID normalisation continuing to weigh on some names.

Dividend maintained, despite growth focus

The trust is primarily focused on capital growth but recognises the importance of income to shareholders. It maintained its annual dividend at 4.2p per share, funded from a combination of revenue earnings (2.01p per share) and distributable reserves. Three interim dividends of 0.9p and a fourth of 1.5p will be paid, with the final payment scheduled for 30 April 2025.

Thematic alignment: AI, ageing population and energy transition

The manager continues to align the portfolio with three key long-term themes: Artificial Intelligence (31% exposure): beneficiaries include Nvidia, Microsoft, Meta, Apple, and BESI; Ageing Population (20%): via holdings such as Illumina, Novo Nordisk, CSL, and ResMed; and Energy Transition (14%): represented by names like Kingspan, Atlas Copco, Linde, and Hexagon. These themes are seen as long-term structural drivers of returns, and the manager is confident they provide a robust foundation for growth despite macro uncertainty.

Outlook: volatility brings opportunity

The post-year-end period has been marked by renewed volatility, driven by tariff announcements from the Trump administration and rising geopolitical tensions. The manager sees scope for a slowdown in economic momentum – particularly in the US, Europe, and China – but believes that high-quality, cash-generative growth companies with pricing power and innovation capacity are best placed to weather the turbulence.

Valuations, while higher than the benchmark on a pure PE basis, are considered attractive once adjusted for superior growth and returns on invested capital.

[QD comment MR : Performance has been challenging in recent years, and it is good to see the board taking steps to address this. Hopefully, deeper integration with Franklin Templeton and its enhanced research resources will help in this regard. While the portfolio continues to reflect high-conviction, long-term thinking, the challenges of active management in a benchmark-dominated environment were clear this year.

Relative underperformance will concern some, especially against the backdrop of a booming global equity market led by US mega-caps. However, the trust’s focus on structural themes like AI, ageing demographics, and energy transition, alongside the fee cut and team expansion, may help rebuild confidence. The key now is delivery – shareholders will expect the improved research platform and streamlined cost base to translate into stronger relative returns in the years ahead and, if not, we expect the trust will find itself under pressure.]