Shifting from bonds to equities and managing dividend cuts
Bruce Stout, manager of Murray International Trust, talks us through current investment...
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. Aberdeen Standard Investments (ASI) 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
Aberdeen Standard Investments (ASI) is a brand of the combined investment businesses of Aberdeen Asset Management and Standard Life Investments. The merger of these two businesses was completed in August 2017 to achieve operational economies of scale, and the group now boasts 1,000+ investment staff in more than 50 locations across Europe, the Americas, Asia and beyond.
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 ASI, 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
The board comprises six members and is headed by Kevin Carter as chairperson. He is a former CEO of Old Mutual Asset Managers in the UK and the United States and has extensive experience of board memberships for investment trusts and pension schemes. Kevin and audit committee chair, Marcia Campbell, will both be retiring from the board following the Annual General Meeting in 2021.
The other board members have a vast array of legal, business and investment management experience and include Clare Binyon, David Hardie, Alexandra Mackesy and Simon Fraser. Simon joined the board on 1 May 2020.
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 ASI’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.
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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2019 turned out to be a good year for world stock markets. As we head into 2020 your hosts, Juliet Schooling Latter and Darius McDermott, take us on a whistle-stop tour of the globe, garnering opinion from Elite Rated fund managers as to the outlook for various markets and asset classes in the coming 12 months.
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