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Murray International Trust: April 2021 Update

In this investment trust update, Investment Analyst Henry Ince shares our analysis on the manager, process, culture, cost and performance of the Murray International Trust.

Important notes

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.

  • Bruce Stout is an investment trust industry veteran and has been involved with this trust since 1992
  • The trust invests more in emerging economies over developed ones, which sets it apart from peers
  • A well-resourced team with analyst coverage in all corners of the market

How it fits in a portfolio

Murray International seeks to grow income and capital over the long term by investing in shares from around the globe, as well as some bonds. The managers favour emerging over developed markets, so the trust could provide useful diversification for a 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 NAV.

Manager

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 (now Aberdeen Standard Investments) in 2000. Stout has played a pivotal role in transforming this once UK-centric trust into the globally diversified trust it is today.

He’s supported by longstanding colleagues Samantha Fitzpatrick and Martin Connaghan. Both have plenty of industry experience and have been involved with 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.

Process

Stout and his team invest in high-quality, financially robust companies which 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 utilise 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 growth.

Historically, investors seeking income focused on the UK, but Stout and his team have found more and more opportunities overseas in recent years and now just 6% of the trust invests in the UK. Asia is the largest allocation, accounting for 29% of the portfolio. 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. 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 11% which are mainly from Asia and higher-risk 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. Stout took advantage of stock market volatility to do just that over the past year.

The insurance sector proved a great source of new ideas with Swiss based Zurich Insurance, Danish firm Tryg and Chinese company Ping An Insurance all added to the portfolio. Other purchases included property developer China Resources Land and Taiwan-based electronics manufacturer Hon Hai Precision.

The managers can use gearing (borrowing to invest), which can boost gains but also increases losses so it’s a higher-risk approach. They can also use derivatives to help them invest, which if used, increases risk too.

Culture

The trust is part of Aberdeen Standard Investments, which was created with the merger of Aberdeen Asset Management and Standard Life plc in 2017. Mergers have the potential to cause disruption, but we think this one benefited the trust by giving the managers access to a bigger pool of resources.

Considering environmental, social and governance matters (ESG) is an integral part of investing at the company. It has dedicated a large amount of resources towards ESG, so they can actively engage with companies and exercise their right to vote on ESG issues.

Cost

The ongoing annual charge over the trust’s financial year to 31 December 2020 was 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.

Performance

Long-term performance under Bruce Stout has been strong. Since June 2004 the trust’s delivered returns of 483.0%,* compared with 426.4% for the FTSE All-World Index, although this 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.

Over the past year (to end of February) the trust’s net asset value (NAV) rose 9.2%, compared with 19.4% for the benchmark. The share price rose 8.9%. Part of the trust’s underperformance can be put down to a lack of exposure to the US, and large US tech companies, which saw strong returns over the period.

It’s been a tough year for income investors as corporate finances were stretched and many companies found themselves unable to pay dividends. That said, over half of the companies in the trust increased their dividend, including several double-digit rises. For those companies that did cut dividends, energy, financials and airports were the main culprits.

A 54.5p per share dividend was paid for the period – a 1.9% increase on the previous 12 months, although the managers dipped into dividend reserves built up over previous years. At the time of writing the trust trades at a premium of 1.7% and yields 4.9% which is much higher than the global stock market, although income is variable and isn’t guaranteed. Yields are not a reliable indicator of future income.

Annual percentage growth
Feb 16 -
Feb 17
Feb 17 -
Feb 18
Feb 18 -
Feb 19
Feb 19 -
Feb 20
Feb 20 -
Feb 21
Murray International 44.9% 8.9% -0.5% -5.8% 8.9%
FTSE All-World 37.7% 7.8% 2.9% 8.8% 19.4%

Past performance is not a guide to the future. Source: *Lipper IM to 28/02/2021.

Find out more about Murray International including charges

Murray International Key Investor Information

Important notes

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.

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