Murray worth the premium

Murray International investment trust uses active management to beat the market, and its share price premium of more than 4 per cent reflects its track record. It has the best long-term performance record of any global investment trust since its current manager, Bruce Stout, started to run it in July 2004, and it also beats global unit trusts and open-ended investment companies (Oeics) over the five years to the end of October.

It's done just as well against key benchmarks. Since July 2004, the compound net asset value (NAV) total return is 13.8 per cent against its benchmark's total return of 6.9 per cent (the benchmark is a hybrid: 40 per cent FTSE World UK and 60 per cent FTSE World ex UK). Murray International has also beaten broad indices including FTSE World ex UK both in terms of share price and NAV over one, three and five years.

Alan Brierley, investment trust analyst at Collins Stewart, says the views of Mr Stout have proved "prophetic" and have been a key driver of its performance. Nearly half its portfolio is allocated to Asia, Latin America and the emerging markets because Mr Stout thinks developed markets face several years of sub-trend growth. "The manager was a long way ahead of the curve in positioning the portfolio to reflect this tectonic shift in wealth," says Mr Brierley.

It yields 4.16 per cent, which although above the broader market, is not the highest among global income trusts. This reflects its investment strategy of investing in companies on their perceived ability to grow earnings rather than a focus on yield. However, dividend growth usually accompanies earnings growth and that's reflected in the trust's payout record; it has maintained or increased its dividend for 18 consecutive years.

At the company-specific level, Murray International is currently focused on defensive, well-managed companies with solid business models and strong balance sheets that can deliver sustainable earnings and dividend growth. Although many pundits are now touting the values of such companies, Murray has been in them for some time, on the basis that even if earnings and share price growth slow, there will still be a payout.

Although you pay a premium for the shares, the trust has a very reasonable total expense ratio (TER) of just over 1 per cent. There is a performance fee, but it is capped at 0.8 per cent.

Murray is part of the Aberdeen Asset Management stable, and Mr Stout's research process benefits from that company's substantial resources. Holdings are generally selected via a four-stage process:

• Regional equity teams assess the quality of a company, and whether its price is fair;

• They make recommendations for Aberdeen Asset Management's global equity buy list;

• Murray International's fund managers choose the best opportunities from the buy list, taking into account macro-economic factors; and

• They select the most compelling equity and fixed-income opportunities, favouring those which can deliver an attractive yield relative to their share price.

It holds bonds to balance risk and boost yield throughout the economic cycle, although currently they account for less than 10 per cent of assets.

Murray is not the only trust that trades on a premium; several of those we recently featured as 'wealth preservers' also do, for similar reasons. Although it's nice to be able to buy something at a discount, the primary motivation for investing in any fund should be the manager, the mandate, the track record and the running costs. And Murray International ticks all those boxes. Buy.

Source: Morningstar, *Aberdeen Asset Management.

Performance data as at 8 November 2011.

TOP 10 HOLDINGS AS AT 30 September 2011

Geographic breakdown