Murray International 08 October 2019
Disclosure – Independent Investment Research
This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.
Managing over £1.7bn of assets, and with a history stretching back to 1907, Murray International (MYI) is one of the largest and most prominent investment trusts in the UK. With a global focus, MYI invests in both equities and fixed income assets, seeking to deliver total returns in excess of its benchmark with an above average dividend yield.
Whilst longer-term returns have been strong, returns in recent years have been more challenging with the trust lagging over the past five years, although the past 12 months have been more positive. Increasingly, relative performance has become more correlated to the relative fortunes of emerging market indices, with the trust consistently overweight to these regions.
Quality and valuation characteristics are key inputs into the stock analysis undertaken, and the latter consideration has led the manager, Bruce Stout, to hold a very underweight exposure to US equities for a number of years. With the US market a very strong performer relative to most global indices, this has been a headwind, but Bruce maintains his view that this market remains historically overvalued, buoyed by monetary policy as opposed to fundamental corporate performance.
Fixed income positions are held for income generation, and nearly wholly held in emerging market jurisdictions where the manager can generate sizeable yields. Presently MYI yields c. 4.4%, the second highest in the sector. The manager has been successful in increasing the dividend for many years, even during highly challenging times such as 2008-09.
Drawing on a global team of analysts, MYI constructs a relatively concentrated portfolio of around 50 equity positions, augmented by fixed income exposure. Sector exposure tends to be concentrated in areas such as consumer staples, with a stock-selection process which places importance on reliability of earnings and earnings growth. The manager ran technology funds in the 1990s and sees parallels to that period in the current mega-cap technology stocks, with investors seeking passive exposure to areas which have led the market over the past five years near the top of the cycle.
Having traded on an (often sizeable) premium for much of its recent history, Murray International has seen this narrow in recent years, partly as a result of more negative sentiment towards its preferred investment approach and partly as the board remains active in trying to manage premium or discounts that exhibit too great a degree of disparity to NAV. Despite a prolonged period in a more challenging market environment for its investment style, MYI remains at a slight premium to NAV and widely traded.