Murray International 22 July 2020

Murray International (MYI) is managed by Bruce Stout, who uses a high conviction approach on a global basis, with the aim of achieving an above-average dividend yield and long-term growth of capital and dividends.

MYI is primarily invested in equities, with quality and valuation characteristics being key in stock selection. This strategy has led the trust to have a portfolio significantly unlike the benchmark, with an active share of more than 90%. In recent years Bruce has been consistently underweight to the US market, in the belief that, buoyed by excessively loose monetary policy, it is historically overvalued. As well as equities the trust has significant fixed interest exposure, which is currently standing at 14.5% of the total NAV. This is mainly invested in emerging market debt, and helps to generate additional income and provide some portfolio diversification.

As discussed under Portfolio, the trust has struggled in performance terms relative to the benchmark and peers in recent times; its overweight exposure to emerging markets playing an important part in this. The underweight exposure to low-yielding technology and growth stocks, in particular in the US, has also been a factor since these sectors have in large part driven global returns.

While MYI has struggled in recent years compared to its benchmark, its discount has continued to trade close to NAV. An attractive level of dividend, with MYI currently yielding c. 5.3% (as at 07/07/2020), and consistent growth in dividends have likely ensured holders seeking income remain satisfied. In addition the board remains committed to managing the discount or premium, by buying in stock on attractive discounts and issuing shares at a premium.

MYI has a clear strategy in place, with a top-down view of the global macroeconomic environment. This approach informs the manager’s view on valuations and the potential for earnings growth. Due to high valuations, Bruce has consistently run an underweight position to the US – instead favouring the Far East and emerging markets. This strategy has proven a headwind to relative returns in recent years, but should emerging markets start to outperform again MYI would be well placed to benefit. In the short term, concerns or hopes over the global economy and the US dollar will likely have a significant impact on the relative performance of Bruce’s preferred regions and stock characteristics.

Despite the often adverse economic and trading conditions experienced by emerging markets, the trust has successfully increased its dividend each year since 2004. Currently the portfolio is yielding an attractive 5.3%, the second highest in the sector behind only the small (£16m) Blue Planet investment trust.

Over the last decade the trust has struggled in terms of capital growth, largely due to the underweighting towards the US, significantly underperforming peers and the new benchmark. However, should we see a sea-change in environment, with sustained emerging market leadership and weaker US market returns, MYI is likely to return to the outperformance which it previously achieved. Meanwhile the high dividend yield is an attractive return in a low interest rate environment.