Murray International Trust: May 2025 update

• Industry veteran Bruce Stout retired in June 2024, with longstanding colleagues Samantha Fitzpatrick and Martin Connaghan replacing him as co-managers of the trust.

• The trust invests in both bonds and equities (company shares)

• A well-resourced team with analyst coverage in all corners of the market

How it fits in a portfolio

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 compared to the benchmark, 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).

Manager

Longstanding colleagues Samantha Fitzpatrick and Martin Connaghan co-manage the trust. They were appointed co-managers at the end of 2019 and took joint control following Bruce Stout’s retirement.

Previous manager Bruce Stout, an industry veteran, retired in June 2024, having been lead manager of the trust since 2004.

Fitzpatrick and Connaghan both have over 25 years of industry experience and worked for Murray Johnstone which was acquired by abrdn in 2001. Fitzpatrick originally started on the performance and risk team before getting more involved with the trust. Connaghan has held a number of roles including trader and ESG (Environmental, Social and Governance) analyst. They also have plenty of resources at their disposal including a large team of analysts with eyes in all corners of the market.

Process

The team invest in high-quality, financially robust companies that they believe have the potential to grow earnings and dividends over the long term. There’s 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 40-70 names. The managers don’t have a yield (income) 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 the team has found more opportunities overseas over the years and as of the end of March 2025 just 5.8% of the trust was invested in UK shares. North American shares are the largest regional allocation, accounting for 32.7% of the trust’s assets. There’s also a sizeable investment in 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. At the end of March 2025 they accounted for 6.2% of the trust’s assets and are mainly from Asian and emerging markets. They only buy bonds they believe are available at a discount to their true worth and occasionally sell them to buy shares.

In 2024, the managers added several new companies to the portfolio. These included German luxury car manufacturer Mercedes-Benz, which is aiming to improve margins by focusing on the sale of higher-priced vehicles. The team also invested in UK residential property developer Taylor Wimpey, as the ongoing undersupply of housing in the UK is expected to support long-term growth. Additionally, US drinks company Coca-Cola and US healthcare company Medtronic were added to the portfolio.

To fund these new positions, the team sold several holdings. Swedish industrial company Epiroc was sold following strong performance, as the team believed there were better opportunities elsewhere. They also sold Swiss healthcare company Roche, due to stronger conviction in other healthcare stocks they hold. Finally, the investment case broke down for Chinese property company China Vanke, leading to its sale.

Investors should be aware the trust can borrow money to invest with the intention of increasing returns (known as gearing), but this could magnify losses in a falling market and increases risk. At the end of December 2024 gearing stood at 6.1%. This is lower than the previous year when gearing stood at 8%.

The investment trust structure also gives the managers the flexibility to also invest in higher-risk unlisted companies, but this is not currently used.

Culture

The trust is managed by Aberdeen, 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 who will be taking over from Stout in June 2024 – they work collegiately and welcome the support of the group’s analysts based all over the world.

ESG integration

Aberdeen is a firm well known for its commitment to ESG (Environmental, Social and Governance). 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. We like that the firm’s policy positions on a range of divisive issues, from plastics and nuclear energy to palm oil and biodiversity, are easily available on its website. The firm also produces frequent ESG-related thought leadership articles, a podcast series and an annual Stewardship report.

We’re pleased to see that the firm’s commitment to ESG has filtered down to the fund level. Aberdeen fund managers generally see themselves as owners of businesses, not investors, and stewardship is an important part of their investment processes. The firm exercises all voting rights and engages with management to encourage best practice. The firm’s comprehensive voting policy helps to achieve consistency across all voting activity.

ESG and stewardship factors are 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. In fixed income, ESG risks are assessed and priced alongside other credit risks, and the managers encourage action that will reduce these risks. As with equities, each issuer receives an ESG risk rating. Aberdeen fixed income managers can invest in bonds issued by companies with a poor ESG risk rating, but they will require greater compensation via the credit spread, and usually take a smaller position size. All managers have access to a central Sustainability Group, as well as specialist on-desk analysts.

The company runs several exclusions-based and sustainable funds, which take its commitment to society, the environment, and other thematic investment goals a step further.

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.

Cost

The trust’s net ongoing annual charge is 0.52%, a marginal decrease from last year where the ongoing annual charge was 0.53%. 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 p.a. 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.

Investment trusts trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges.

Performance

Since Fitzpatrick and Connaghan joined Stout as co-managers in December 2019 the trust has generated a share price return of 36.79%, compared to 63.38% of the FTSE All World and 22.56% of the AIC Global Income Sector. The trust’s Net Asset Value (NAV) rose 50.20% over the same period. Past performance is not a guide to the future.

Given the trust’s income focus and 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.

Over the trust’s latest financial year, to the end of December 2024, the trust underperformed the benchmark and AIC Global Income sector. The trust NAV rose by 8.27%, while delivering a share price return of 4.52%. This compares to a return of 19.81% for the FTSE All Share and 13.65% for the sector.

Over the trust’s last financial year, the team’s investment in Taiwanese technology company GlobalWafers was the largest detractor from performance as demand slowed in the silicon wafer market. South Korean technology company Samsung also detracted from performance as it struggled to keep up with competitors in supplying semiconductor chips. Investments in Mexican supermarket company Walmart de Mexico and airport operator Grupo Aeroportuario Del Sureste both suffered as the Mexican currency came under pressure following the outcome of the Mexican election and the uncertainty over future economic policies.

On the other hand, investments in American companies contributed the most to the trust’s performance. Broadcom was the biggest contributor, benefitting significantly from the increased spending in artificial intelligence. Broadcom are positioned to support AI infrastructure and the growing demand for AI applications. Taiwanese semiconductor company TSMC also benefited from increased spending in AI. They manufacture the most advanced chips in the world and have recently seen a large increase in demand. US tobacco company Philip Morris also performed well.

The trust has seen 20 years of consecutive dividend increases which means it’s now among the AIC’s dividend heroes (trust’s that have increased their dividends for 20 or more years). The total dividend per share for the year to the end of December 2024 was 11.8p. This is marginally higher than the previous year where the total dividend per share was 11.5p. Income is not guaranteed and yields aren’t a reliable indicator of future income. The level of income paid will change over time.

At the time of writing the trust trades at a 4.90% discount to NAV. However over the last 12 months the trust on average traded at a discount of 8.47%, and over the last 10 years averaged a very small discount of 0.02%.