Murray International Trust chairman Kevin Carter said the £1.55 billion closed end fund benefited hugely from the weakness of sterling in the six months to June 30 due to the international nature of the fund’s investments.
Carter noted “extreme distortions” in the financial landscape caused by monetary policy — and said that $13 trillion equivalent of sovereign and corporate bonds trading at negative yields was “unprecedented and scarcely explicable” — but Murray International’s returns certainly enjoyed the effects of a low pound.
The fund reported a return on ordinary activities before tax of £321.9 million compared to a loss of £29.7 million for the same period last year.
In the six months, Murray’s assets rose 21.2% to £1.55 billion, its ordinary share price climbed 19% and net asset value soared 26.4% — but its discount to net asset value rose to 8% from 2.3%.
“The net asset value (NAV) total return, with net income reinvested, for the six months to 30 June 2016 increased by 30.1% compared with a total return of 10% on the company’s benchmark (40% FTSE World UK and 60% FTSE World ex UK),” said Murray International.
Carter said sterling’s weakness was by far the largest contributing factor to the results.
“With close to 90% of net assets invested internationally, the currency’s depreciation proved positive for returns,” said the chairman.
“In addition, increased portfolio diversification from constant recycling of profits over the past two years contributed both positive absolute and relative performance.
“This proved particularly relevant within the fixed income portfolio where recently established emerging market bonds significantly enhanced returns.
“On a regional basis within equity exposures, significant overweight positions in Asia and Latin America were positive from an asset allocation basis as both regional indices significantly increased in sterling terms.
“Positive stock selection in Thailand, Taiwan, Singapore, Hong Kong, Chile and Brazil produced solid capital gains in excess of benchmark indices, as did defensively orientated exposures to the UK and North America.
“Despite negative local currency returns from Japan and European markets, the portfolio’s exposure to selective companies in these regions produced strong capital returns, further enhancing overall absolute and relative outperformance.”
In his outlook, Carter spoke of “extreme distortions” in the financial landscape that monetary policy has produced.
“It is now estimated that some thirteen trillion US dollars equivalent of sovereign and corporate bonds trade at negative yields. This is unprecedented and scarcely explicable.
“It remains to be seen how this will play out in financial markets and the global economy, but policy makers seem certain to find it a struggle to navigate successfully the environment we are now in.
“Corporate earnings globally, but particularly in the developed markets, are under some pressure, and prospects are more than usually opaque as consumers are wary of the prevailing economic and interest rate environments they are facing.
“The company’s portfolio emphasises holdings in nations that have favourable demographics, with reasonable growth and prosperity potential.
“This fact, in combination with maintained stock selection disciplines, underpins the investment positioning of the portfolio.”