Trustnet Magazine Issue 21 September 2016 | Page 19

/ FUND, PENSION, TRUST / Trust MURRAY INTERNATIONAL This is one of the few closed-ended funds that can give its open-ended rivals a run for their money in terms of capital preservation It was one of the best performers in 2011 when the European sovereign debt crisis intensified and topped its sector during the financial crisis in 2008 – its losses of 8 per cent that year were less than one-quarter of those experienced by its peer group average. As a result, Murray International has been one of the best performing IT Global Equity Income trusts in terms of maximum drawdown, risk-adjusted returns (as measured by the Sharpe ratio) and downside capture ratio over 10 years. The trust has also been an effective holding for income investors as its board has a good track record of increasing its dividend. The trust currently yields 4.14 per cent, which – along with Stout’s track record of preserving capital – explains why it is currently trading on a 3.37 per cent premium to NAV. PERFORMANCE OF TRUST VS SECTOR AND BENCHMARK UNDER STOUT 400% Murray International Trust (373.70%) 350% IT Global Equity Income (213.20%) 300% Murray International benchmark (193.33%) 250% 200% 150% 100% 50% 0% Jul 16 Jul 15 Jul 14 Jul 13 Jul 12 Jul 11 Jul 10 Jul 09 Jul 08 Jul 07 Jul 06 -50% Jul 05 FILE MANAGER: Bruce Stout DISCOUNT/PREMIUM: 3.37% GEARING: 12% OCF: 0.75% FE CROWN RATING: period of low returns appears to be on the cards. As such, he has a cautious portfolio of high-quality defensive equities with global earnings streams as well as debt issued by emerging market sovereigns and corporates. “Such stretched, distorted practices keep us cautious and focused on more attractive relative value deemed to exist in emerging market assets,” Stout said. FE data shows the manager’s focus on capital preservation has worked well over the long term. The trust has been the best performing portfolio in the IT Global Equity Income sector since he took charge in June 2004, beating its benchmark by more than 180 percentage points. While the trust has struggled in recent rallies – such as in 2013 – it comes into its own in falling markets. Jul 04 N OW SEEMS LIKE AN IDEAL TIME TO FOCUS ON PORTFOLIOS that can offer downside protection to investors. While equities have rallied hard since the EU referendum, meaning valuations have risen, there is still clear uncertainty surrounding the economic and political impact of Brexit, the upcoming US presidential election and the future path of interest rates in the world’s largest economy. The structure of open-ended funds is regarded as better suited to this objective than that of their closedended counterparts – the latter tend to be more volatile thanks to discount movements and gearing, features not seen in the world of unit trusts and OEICs. Nevertheless, certain managers in investment trust land have built up strong and enviable track records by avoiding the worst that the market has to offer. One of these is Bruce Stout, manager of the popular Murray International Trust. Stout has long-held the view that central bank policies such as ultralow interest rates and quantitative easing have done nothing for the real economy apart from distort financial markets to the point that a prolonged Source: FE Analytics 17