By Ian McConnell

The chairman of the £1.8 billion Murray International Trust yesterday expressed “disappointment” over the fund’s capital performance in his statement on the latest results.

Murray International, which is managed by investment house abrdn, made a total return on net asset value of 14.1% in the year to December 31, 2021.

Chairman David Hardie noted the trust “has no benchmark” but added that “this performance compares with a rise over the same period of 7.6% for the UK retail price index and a total return for the reference index, the FTSE All World...Index, of 20.0%”.

While flagging data indicating that “over the longer term, the company has been delivering on its investment objective to shareholders, Mr Hardie added: “However, in recent years, capital performance has underperformed the reference index and, indeed, the company’s peer group; while this is understandable to an extent, given the significant differences between the company’s portfolio and both of these, it has of course been a source of disappointment to the board.

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“Accordingly, the board and manager have engaged extensively to discuss the manager’s investment style and other factors behind this.”

abrdn’s Bruce Stout is lead manager of Murray International.

Mr Hardie noted these discussions had “included topics such as: the manager’s focus on high quality companies with strong balance sheets and track records, which have been out of favour more recently but which may be better able to weather market volatility and higher inflationary environments over the longer term; the company’s preference to pay its dividends fully from revenue and revenue reserves, rather than seeking to distribute from capital; and the company’s high dividend yield, which leads its peers”.

He said: “It is noteworthy that it is these factors and the company’s ownership of both bonds as well as equities which provide shareholders with a markedly different and, hopefully, attractive opportunity for diversification.”

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However, he added: “In addition, adverse stock selection has clearly also played a part in the recent underperformance…The board continues to challenge the manager to identify investment opportunities with an acceptable yield that also have attractive growth prospects and are able to balance successfully the need for income with the company’s desire to deliver capital growth over time.”

Mulling the outlook for global markets, Mr Hardie highlighted uncertainties.

He said: "The global geopolitical situation looks increasingly uncertain as a result of the recent Russian invasion of Ukraine and the consequences and implications which will flow from that. Whilst the company does not have any direct investment in Russian or Ukrainian equities or bonds, the portfolio does include exposure to some multinational companies with operations there, or potentially affected by these events. However, at the time of writing, little more can usefully be said save that the position will, of course, continue to be monitored by the manager and the board. This is in addition to the uncertainties resulting from the pandemic."

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Mr Hardie added: "As the global economy begins to confront the numerous challenges presented by the ongoing pandemic, certain key issues stand out. Many businesses face an uncertain future from irrevocable changes to work practices, employment demographics, consumer spending patterns and leisure behaviour. Governments will count the costs of expanding fiscal deficits with the unenviable task of allocating future generations the debt burdens. Finally, policymakers must tackle an unfamiliar economic landscape where rising prices and wages arguably present the most serious hurdle for custodians of economic prosperity.