THE manager of the £1.6 billion Murray International Trust has described the UK economic environment of record low interest rates and gilt yields as “horrible”, and warned companies will consequently have to raise pension fund contributions.

UK base rates were cut by a further quarter-point this month by the Bank of England to a fresh record low of 0.25 per cent, amid fears that the UK electorate’s vote to leave the European Union could trigger recession. The Bank also increased its quantitative easing programme of Government bond purchases from £375bn to £435bn.

Murray International Trust manager Bruce Stout, of Aberdeen Asset Management, said: “Pulling rates down and down and down and printing money is not a solution to anything. It hasn’t been for seven or eight years now. Still they do it.”

He underlined his general lack of appetite for investing in UK companies as the trust revealed a huge boost to its investment performance from sterling’s plunge after the Brexit vote. The trust also flagged the benefits of overweight positions in Asia and Latin America.

Murray International, which has tens of thousands of private shareholders, benefited from the pound’s tumble because nearly 90 per cent of its net assets are invested overseas.

Mr Stout said: “One of the biggest issues you have is there is nothing familiar about the UK or Europe any more. They have just run out of all fiscal policy options, all monetary policy options. Particularly the UK over recent years has become a hostage to foreign capital.”

He noted that the UK had gone into 2016 with its biggest current account deficit since 1955, when records began.

Mr Stout said: “The longer this low-yield environment persists, the more money companies are going to have to put into their pension funds, which is something that has also been building up for the last few years.

“If pension funds are invested in bonds, and bonds have no yield, how on earth are they going to cover their liability?”

He noted the proportion of Murray International’s portfolio in the UK was at its lowest level for 20 years, adding that the trust, about 15 years ago, would have had around 40 per cent of its assets in the UK.

Highlighting what he believes is the biggest pressure on UK corporate dividends, Mr Stout asked why companies would pay high yields when the yield on a 10-year gilt was only 0.56 per cent.

Mr Stout said the trust was now invested in only seven UK companies, including Glasgow-based engineer Weir Group.

He noted the trust’s absolute and relative investment performance had been strong even before the pound’s tumble following the UK electorate’s June 23 Brexit vote.

Murray International achieved a total return on net asset value of 30.1 per cent in the six months to June 30. This was way ahead of a 10 per cent total return on its benchmark, a 40-60 composite of the FTSE World UK and FTSE World ex UK indices.

The trust highlighted good returns from emerging market bond holdings, which it has built up in recent times.

Asked for his view on how the Brexit vote might affect the UK economy, Mr Stout replied: “We just don’t know. Nobody knows. Nobody can quantify, or try to project what will happen because there is no roadmap for this. We just don’t know what is ahead here.”

Trust chairman Kevin Carter said the portfolio was focused on “nations that have favourable demographics, with reasonable growth and prosperity potential”.

He highlighted general consumer wariness over global economic and interest rate environments.

Murray International also warned the Brexit vote might affect its risk profile by “introducing potentially significant new uncertainties and instability in financial markets as the United Kingdom negotiates its exit from the EU”.