Funds to watch in 2023
As we start a new year, FundCalibre’s research team takes a look at the funds and trusts we think...
Murray International Trust
Investment trust
As the name suggests, this trust offers an international portfolio of UK and global equities, as well as some bonds. The manager may invest anywhere in the world and in any sectors, with a focus on maintaining an above-average yield for investors.
Our opinion
This is a genuinely international portfolio. abrdn is well-known for its global equity research capabilities and Bruce makes full use of the resources available to him. Overall, his style has meant that returns have been very strong in some years and weaker in others, but he has delivered in the long run. As a result, Murray International may suit investors who have a long-term investment horizon and are looking for income and growth from global markets. We like the fact the trust focuses on defensive business where the manager feels he will be able to retain both earnings and dividends, without paying over the odds.
Trust manager
abrdn is the new brand of Aberdeen Standard Investments (ASI). It unifies the merger of Aberdeen Asset Management and Standard Life Investments, which took place in August 2017. With more than 30 locations worldwide, abrdn seeks to find the most sustainable investment opportunities globally.
Bruce Stout is a senior investment manager on the global equities team and has managed Murray International since 2004. Bruce joined Aberdeen in 1987 via the acquisition of Murray Johnstone. He has held a number of roles within the firm, including as an emerging markets fund manager. He is assisted on the fund by head of global equities, Stephen Docherty, who joined Aberdeen in 1994. Prior to this, Stephen worked for Abbey National Plc in the department of actuarial services within the life division.
Followers of investment fashion invariably pay extravagant prices to own the latest, must-have, in vogue stocks. For those of a more thrifty disposition, our investment process focuses more on sustainable, long-term growth opportunities where valuations have yet to reflect widespread popular recognition.
Bruce StoutTrust manager
Investment board
David Hardie is chairman of the Murray International Trust. David is a corporate lawyer by background and was formerly a partner of UK law firm, Dundas & Wilson (now part of CMS), where he was a partner for over 30 years and where he previously held various positions including head of corporate, managing partner and chairman.
The five-strong board also includes Claire Binyon, Alexandra Mackesy, Nick Melhuish and Virginia Holmes.
Investment process
The assets are invested in a diversified portfolio of international equities and fixed income securities spread across a range of industries and economies. Although Bruce has the final say, in general abrdn’s investment style is very much a team effort. At the heart of the process is well-disciplined stock research. Bruce, in effect, has two mandates: to protect his investors’ money and grow it over the long term, and to provide above-average income.
Bruce prefers simple businesses that have a strong ability to produce surplus cash and a resilient business model. These could be in any industry. He is also prepared to invest anywhere in the world he sees value, with Murray International’s investment process giving him a buylist of around 900 stocks to choose from. His investment horizon when selecting stocks is at least five years. There are no limits regarding geographic or sector exposure, but a maximum 15%, at the time of investment, is allowed in a single holding.
The trust also has the ability to invest in fixed income securities, with the process of selecting and monitoring both sovereign and corporate bonds following exactly the same structure and methodology as equities, with the manager using the global investment resources available.
ESG
ESG - Limited
Although ESG factors are not the overriding criteria in relation to the investment decisions for this trust, significant prominence is placed on ESG and climate related factors by the asset management firm. abrdn has around 150 equity professionals globally, all of whom analyse ESG risks and opportunities for each company, it also has a 20 strong ESG investment team, providing consultancy and insight.
A globally-applied approach to evaluating stocks is used to compare companies consistently on their ESG credentials – both regionally and against their peer group. This looks at which ESG factors are relevant for a company, how material they are, and if they are being addressed; abrdn’s own assessment of governance, ownership and management; and if incentives and key performance indicators are aligned with company strategy/shareholders. A combination of external and proprietary in-house quantitative scoring techniques are also applied. The result is a five-step scale which evaluates companies from ‘best in class’ to ‘laggard’ from an ESG perspective.
Risk
Murray International is a relatively focused portfolio of no more than around 50 stocks and 30-40 bond holdings (although it has the ability to hold more), so stock selection risk is higher than in trusts that invest in more companies. Currency is another factor that needs to be considered, as the manager does invest globally. However, Bruce is a seasoned investor and ASI’s rigorous process and well-resourced team do go a long way to mitigate these risks.
Gearing
The board believes the judicious use of gearing can enhance returns to the shareholders. Any borrowing (except in the short-term for liquidity purposes) is used for investment purposes or share buybacks. The board sets the level of gearing and continuously monitors that level to ensure it remains within authorised limits. Normally, the gearing will not exceed 30% of the trust’s net asset value.
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