Murray International 28 January 2021
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
Murray International Trust (MYI) is managed by Bruce Stout, who aims to generate a high yield with income and capital growth from a diversified portfolio of global equities supplemented with bonds. MYI offers investors a 4.8% yield, in excess of the AIC Global Equity Income sector average. Despite the impact of the pandemic on companies’ ability to pay dividends, the trust has so far paid three interims which were higher than last year’s, and has extensive revenue reserves to draw on.
Bruce implements a ‘growth at a reasonable price’ strategy with a highly active, benchmark-agnostic approach. His economic views have led to a long-term overweight to emerging markets, which makes the trust stand out in the AIC Global Equity Income sector and offers diversification to the typical more developed world global trust.
As we outline in the Performance section, MYI has performed marginally ahead of its AIC Global Equity Income peer group over five years. However, it has underperformed its reference index, the FTSE World, over the last five years due to this distinctive positioning, particularly the underweight to the US and the overweight to Latin America (although we note the reference index is dominated by the low-yielding USA, which has outperformed over this period).
Perhaps due to its high yield and its diversification benefits, MYI has generally traded at a narrow discount over recent years, with a current discount of 3%. The board operates an active policy of discount control to ensure that MYI trades close to NAV.
MYI offers an attractively high yield with healthy revenue reserves, which we believe is why it has managed to maintain a narrow discount over the years. Lead manager Bruce Stout’s preference for emerging markets has nonetheless not been helpful from a total return perspective versus a global market benchmark. However, it has meant that the portfolio has been more resilient to the impact of the coronavirus crisis on its revenue account than was the case for other equity income trusts, in particular UK equity income trusts. The board commented in June that it intended to maintain or grow the payout in the 2020 financial year, and although some time then passed the board did declare an interim in November which was level with the two previous payouts and above the equivalent in 2019, which we view as a good sign that the target of growing the full-year payout will be met.
MYI contains diversifying exposures to typical global equity income trusts, with significant overweights to Latin America and Asia ex China. This means it could offer diversification benefits to many investors and potentially catch-up potential if market leadership changes, as the areas the trust favours have long been out of favour and seen as ‘value’ plays.
|Offers clear diversification benefits compared to its peers
|Highly active country positioning could lead to underperformance of global markets
|MYI’s value-orientated portfolio may perform well in a COVID-19 recovery
|Use of gearing can amplify losses
|Offers a competitive above-average dividend yield
|The impact of COVID-19 on Latin America, an MYI overweight, continues to drag on the region