THE manager of the £1.5 billion Murray International Trust has berated central bankers for following loose monetary policies after the investment vehicle trailed well behind its benchmark in the latest year.
The trust, which is managed by Aberdeen Standard Investments, achieved a net asset value total return of 12.4 per cent in 2019 compared with 21.1% for its benchmark.
By contrast, Alliance Trust, which used to be self-managed in Dundee but is now run by specialists based outside Scotland, outperformed in 2019.
It achieved a net asset value total return of 23.1% against 21.7% for its benchmark.
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Murray International Trust’s chairman, Kevin Carter, suggested it may have been penalised for following a disciplined approach while company valuations were inflated as a result of moves by central bankers to boost liquidity.
This has seen the valuations of some technology firms that are seen as having strong growth potential soaring although they pay out relatively little in the way of dividends.
“Three interest rate cuts by the US Federal Reserve paved the way for extremely favourable worldwide liquidity conditions, and asset prices responded accordingly,” said Mr Carter.
He added: “Within most regional benchmark indices, low-yielding technology and growth companies contributed most to positive returns. For the company’s more income focused portfolio this proved challenging in relative performance terms.”
Bruce Stout of Aberdeen Standard Investments said concerns about the impact of the COVID-19 coronavirus have stoked market volatility following a decade-long monetary policy experiment that had failed to normalise economic and financial systems.
“Rooted in pursuit of pain-free, political popularity, complicit central banks succeeded only in shredding the final fragments of their waning credibility,” he noted.
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The trust said it expects to manage the challenges associated with volatility and heightened risk aversion by taking a long-term view and focusing on high quality, financially strong companies that are exposed to positive economic trends through a globally diversified portfolio.
The chairman of the £2.9 billion Alliance Trust, Gregor Stewart, said its performance demonstrated the value of investing longer term in the highest conviction stocks chosen by the nine firms that manage its funds.
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“This performance has been achieved in what has been a challenging environment for active managers, given the low dispersion and narrow leadership of US mega cap technology stocks driving markets,” he said.
Alliance Trust moved to a multi-manager investment approach in April 2017 while it was under the chairmanship of Lord Smith of Kelvin.
The trust said it had achieved a 27.1% net asset value total return since then compared with 25.5% for the benchmark MSCI All Country World Index.
The trust employs five people in its Dundee head office.
Subject to shareholder approval, Murray International Trust is to adopt the FTSE All World TR Index in place of the current benchmark. This is a composite of 40% of the FTSE World UK Index and 60% of the FTSE World ex UK Index. The change is intended to reflect the fact the trust's exposure to UK assets has fallen considerably since the benchmark was adopted in 2000.
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