Investment trust beats index again

Group Business Editor

Thursday 13 September 2012

THE £475 million Murray Income Trust beat its benchmark All-Share Index convincingly in the year to June 30 as it benefited from underweight positions in mining and banking stocks and overweight stances on tobacco, pharmaceuticals, utilities and food producers.

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ian mcconnell business editor

The investment trust, which aims to achieve a high and rising income combined with capital growth through investment in a portfolio principally comprising UK equities, said yesterday that it had achieved a total return on net asset value of 1.4% in the year to June. This compared with a negative total return of 3.1% on its benchmark, the UK's FTSE All-Share Index.

Murray Income, which is managed by Charles Luke of Aberdeen Asset Management and has thousands of private investors, highlighted the fact that this was its third consecutive year of outperforming the All-Share Index.It is raising its total dividend by 3.5% to 29.75p-a-share, with a final payout of 13.25p.Mr Luke noted that the share price of portfolio companies British American Tobacco, Imperial Tobacco, doorstep lender Provident Financial, leisure company Whitbread, and engineering group Rolls-Royce had all increased by more than 20% during the year to June. He added: "The defensive qualities of the tobacco sector, coupled with strong pricing power and cost-saving initiatives, proved very attractive to investors over the period. Provident Financial performed strongly as the environment for home-collected credit remained benign, and the company's credit card operations performed strongly."Whitbread's Premier Inn budget hotel chain and Costa Coffee shops outperformed expectations. Finally, Rolls-Royce performed strongly as the market's earnings expectations proved to be too low given strong demand in its civil aerospace division."However, Mr Luke highlighted the fact that supermarket giant Tesco had proved a drag on Murray Income's performance in the year to June 30.He said: "Tesco's profit warning at the start of the calendar year was caused by the recognition that its domestic operations had focused too much on profitability to the detriment of quality and service levels, and that this now needed to be remedied."He highlighted the benefits of Murray Income's significantly underweight position in mining stocks in the year to June, while acknowledging this stance had proved a drag on performance in the prior two years.Mr Luke is maintaining this underweight position in mining stocks.He said: "Having been detrimental to performance for the prior two years, our large underweight position in mining provided the greatest contribution to performance from an asset allocation viewpoint."We remain underweight for three key reasons: we have concerns about the quality of various companies within the sector; the dividend yields available are comparatively poor; and, finally, we believe that many of the companies do not at present represent attractive value given the challenging backdrop."He also highlighted Murray Income's continuing concerns about the prospects for banking stocks. Mr Luke said: "In the financials sector we continued to benefit from being underweight in banks given our concerns regarding the regulatory backdrop, prospects for growth and asset quality, coupled with the low level of dividends available."He noted the strong performance, in the food sector, of portfolio companies Associated British Foods and Unilever.

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Investment trust beats index again

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