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In this investment trust update, Lead Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, ESG integration, cost and performance of the Murray International Trust.
This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.
Murray International Trust aims to grow income and capital over the long term by investing in company shares from around the globe, as well as some bonds. The managers invest more in higher-risk emerging markets than developed markets, so the trust could provide useful diversification to an investment portfolio investing in more traditional income hunting grounds such as the UK. Investors in closed-ended funds should be aware the trust can trade at a discount or premium to Net Asset Value (NAV).
Bruce Stout is an industry veteran and has been lead manager since 2004, but his involvement with the trust started in 1992. Previously he worked as an investment manager covering emerging markets at Murray Johnstone, which was acquired by Aberdeen in 2000 (Aberdeen merged with Standard Life in 2017 and has since rebranded as ‘abrdn’). Stout has played a pivotal role in transforming this once UK-centric trust into the globally diversified trust it is today.
The manager is supported by longstanding colleagues Samantha Fitzpatrick and Martin Connaghan. Both have plenty of industry experience and have been involved in managing global equity portfolios for the last 15 years. The trio have plenty of resources at their disposal including a large pool of analysts with eyes in all corners of the market.
Stout and his team invest in high-quality, financially robust companies that they believe have the potential to grow earnings and dividends over the long term. There is an emphasis on companies with resilient business models, a unique set of advantages over the competition and experienced management teams.
To identify opportunities, they use research from across the firm’s regional teams. This helps the managers whittle down a universe of around 13,000 companies to a final portfolio of between 40-60 names. The managers don’t have a yield target for the companies they invest in. Instead, they blend companies with higher yields, and those with lower yields but more potential for income growth.
Historically, investors seeking income focused on the UK, but Stout and his team have found more opportunities overseas over the years and now just 4.9% of the trust invests in the UK. Asia is the largest allocation, accounting for 29.0% of the trust. The managers think companies here tend to be less constrained by debt, leaving them in a better position to pay dividends, while also reinvesting in the business for future growth. There’s also a sizeable allocation to Latin America and other emerging markets. The managers believe valuations in this part of the world remain attractive.
The managers also invest part of the trust in bonds, currently they account for around 10% and are mainly from Asian and emerging markets. They only buy bonds they believe are available at a discount to their true worth, and often use them as an easily-accessible source of cash to buy shares. For example, they reduced investments in emerging markets bonds last year and recently sold Indian corporate bonds.
The managers believe higher inflation is supportive of companies owning real assets and exposed to the global economic cycle. As a result, they’ve recently invested in companies such as Enbridge, a Canadian natural gas distribution company, and Bristol Myers, a global biopharmaceutical company.
The managers can use gearing (borrowing to invest), which can boost gains but also increases losses so it’s a higher-risk approach. At the time of writing gearing stands at 12%. They can also use derivatives to help them invest, which if used, increases risk too.
The trust is managed by abdrn, which was created with the merger of Aberdeen Asset Management and Standard Life plc in 2017. Mergers have the potential to cause disruption, though this one provided the managers with access to a bigger pool of resources.
Stout took over as sole manager of this trust in 2004 but has been part of the global equities team for many years and has demonstrated dedication to this trust and its long-term investment strategy. He’s worked with co-managers Fitzpatrick and Connaghan for over 20 years – they work collegiately and welcome the support of the group’s analysts based all over the world.
Abrdn is a firm well known for its commitment to ESG (Environmental, Social and Governance issues). Responsible investing has been part of the business since it set up its Corporate Governance team in 1992 and launched its first ethical fund in 1994. ESG and stewardship factors are also included in every stock research note and each firm receives an ESG score, based on its ESG credentials and its ability to manage ESG risks. All managers have access to a central ESG team, as well as specialist on-desk ESG analysts.
This trust’s Board engages actively with the manager on the assessment and integration of ESG factors. While the trust integrates ESG analysis, it does not have any exclusions, which means it can invest in any sector.
The trust’s ongoing annual charge is 0.68%. Investors should refer to the latest annual reports and accounts, and Key Information Document for details of the risks and charging structure. If held in a SIPP or ISA the HL platform charge of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. The HL platform charge doesn’t apply if the trust is held in a Fund and Share Account.
Long-term performance under Bruce Stout has been strong. Since June 2004 the trust’s delivered returns of 605.81%* in share price terms compared with 496.30% for the FTSE All-World Index, although as always past performance is not a guide to the future.
Due to the large differences in the trust’s geographical exposure compared with the broader global stock market, there could be times when performance will be very different to the benchmark, both positively and negatively. We’ve seen this occur since Stout has managed the trust.
Until 2012, the trust performed significantly better than the global stock market and benefited from its exposure to Asian and emerging markets. However, this has proven a headwind over the past decade, as emerging markets haven’t performed as well as some developed markets. The US in particular has done exceptionally well over this time, but most global income funds don’t have as much invested in the US as growth-focused funds, because US companies don’t tend to pay as much in dividends.
So far this year, the trust has performed better than the global market, helped by investments in Asia and Latin America. Investments in energy, mining, commodities and pharmaceutical companies have also helped.
Key to this trust is its focus on income. It aims to grow its dividend ahead of the rate of inflation – something it has achieved in 15 of the 17 years Stout has managed the trust. The trust has also seen 16 years of consecutive dividend increases and currently yields 4.52%. Income is not guaranteed and yields aren’t a reliable indicator of future income. The level of income paid will change over time.
|Annual percentage growth|
| Apr 17-
| Apr 18 -
| Apr 19 -
| Apr 20 -
| Apr 21 -
|Murray International Trust||1.69%||3.9%||-13.87%||31.01%||8.58%|
|FTSE All World||7.77%||11.26%||-1.29%||33.40%||4.76%|
Past performance is not a guide to the future. Source: *Lipper IM to 30/04/2022.
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Our investment trust research is for investors who understand the risks of investing and that investing in investment trusts isn't right for everyone. Investors should only invest if the trust's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of an investment trust before they invest, and make sure any new investment forms part of a diversified portfolio.
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