THE MANAGER of Murray International has pointed to the fact that 2018 "witnessed the worst performance from global equities in a decade” as the reason for the £1.6 billion investment trust not only making a negative return over the 12-month period but underperforming its benchmark too.

Although the trust, which is managed by Aberdeen Standard Investments’ Bruce Stout, had made a net asset value total return of 40.6 per cent in 2016 and 14.7% in 2017, in the year to December 2018 its return was -7.5%.

In the previous two years the trust had outperformed its benchmark, which is weighted 40% to the FTSE World UK index and 60% to the FTSE World excluding UK index, but in 2018 it underperformed by two percentage points.

“The term rollercoaster barely does justice to the path of financial markets over the [2018] period,” Mr Stout said.

“First-quarter weakness reversed into second-quarter strength, which in turn evolved into third-quarter euphoria before a year-end rout.

“A modest -5.2% calendar year benchmark index decline in sterling terms masked general asset price weakness and volatility.

“Stagnation surrounding Brexit and indifference towards Europe depressed returns from both the UK and European equity markets. Over 9% declines in each reflected increasing investor apathy and emphasised how problematic the delivery of decent corporate profits in slow growth economies has become.”

Though he said the trust was insulated somewhat from relatively low exposures to the UK and Europe, Mr Stout noted that the weakness of some of the UK companies held in the portfolio wiped out the benefits defensive stock selection in Europe should have brought.

Overall, investments in financial businesses such as America’s CME Group and Malaysia’s Public Bank contributed most to returns while tobacco companies Philip Morris and British American Tobacco were among the biggest detractors.

Despite the slight underperformance, the premium at which the trust’s shares traded increased year on year - from 1.3% to 2.2% - while the board intends to transfer £2.5 million from reserves in order to pay an increased dividend for the year of 51.5p. That is a 3% increase on the 50p per share paid in 2017.

“This small transfer from reserves is in line with the policy that I have advised shareholders of in previous years,” said chairman Kevin Carter.

“The board intends to maintain a progressive dividend policy given the company’s investment objective.

“This means that, in some years, revenue will be added to reserves while in others revenue may be taken from reserves to supplement earned revenue for that year to pay the annual dividend.

“Shareholders should not be surprised or concerned by either outcome as, over time, the company will aim to pay out what the underlying portfolio earns.”