End Of An Era At Murray International

Bruce Stout, the long-standing manager of the £1.7bn Murray International Trust (LON: MYI) has just announced that he is going to retire in June 2024. Martin Connaghan and Samantha Fitzpatrick, who have assisted him for more than 20 years, have taken on co-manager responsibilities with immediate effect to help ensure a smooth handover.

During his time in charge the trust has generated an NAV total return of 565%, which is ahead of the 538% achieved by the FTSE All World benchmark.It has also delivered on its income mandate, with 18 years of consecutive dividend increases and currently yields 4.6%.

Darius McDermott, managing director at FundCalibre, says that for the best part of two decades, Stout has delivered excellent returns for investors.

“While his style has meant that returns have been very strong in some years and weaker in others, there is no doubting his process of focusing on defensive businesses which are able to retain both earnings and dividends, without paying over the odds, has been incredibly successful over the long-term.”

Stick Or Twist?

The news gives ample time for a transitionary period, but raises the question of whether investors should stick with it or move their money elsewhere. This is particularly relevant given the high following with retail investors that emerged during the global financial crisis when his defensive approach performed relatively well.

In recent years the returns have been more mixed as the fund lagged in the growth rally that dominated markets until late 2021. However, it was back amongst the strongest performers the year after when value stocks recovered, only to slip behind again during the recent tech boom.

The broker Numis says that the new managers are experienced in the approach and know the portfolio well, but they have big boots to fill as Stout was the figurehead for the fund, as well as the wider abrdn stable.

“The fund offers a diversification of income and pays an attractive yield of 4.6%. The shares are currently trading at a five percent discount and it will be interesting to see how retail investors react to the news. We expect the new team will need to be very visible to continue to reassure investors.”

Portfolio And Outlook

The announcement was made on the release of the interim accounts for the six months to the end of June, during which the fund produced an NAV total return of 2.2% compared to 7.9% for the FTSE All World benchmark. This underperformance was due to the lack of exposure to US mega cap tech stocks that rallied in response to the enthusiasm for Artificial Intelligence.

Murray International has a diversified portfolio with 26% to 29% invested in Europe, North America and Asia Pacific ex Japan, with a further 14% in Latin America/emerging markets. The management team focus on high quality companies with durable businesses models, competitive moats and attractive industry dynamics, as well as strong financials, management teams and ESG credentials.

Stout describes the actions of central banks of constantly hiking interest rates in response to stubbornly high inflation as akin to “cracking a nut with a sledgehammer”, which does not deliver the desired results as “the shell usually breaks but the kernel invariably gets pulverised in the process”.

Against this backdrop he advises caution, hence the team’s continued focus on quality companies and maintaining a diversified portfolio. While doing this they will also seek to avoid any hostile, cyclical headwinds.