Bruce Stout warns of volatile markets for the rest of the year

The manager of Murray International Trust says investors face choppy markets for the rest of 2020.

Investors will have choppy markets to contend with for the rest of the year, the manager of the Murray International Trust (LSE:MYI) has warned, as every major economy suffers the impact of Covid-19. 

Bruce Stout, who has run the £1.3 billion trust since 2004, added that investors should be wary as exits from lockdowns will not be smooth. His comments were made as the investment trust slipped behind its benchmark in the first half of 2020.

“Markets are likely to remain volatile for the duration of the year,” the manager said. 

“Expectations are for every major economy to contract, contending with slower growth, record low bond yields and companies struggling to achieve meaningful earnings growth, in the short term. The exit from lockdown will not be smooth and will be subject to periods of reversal. 

“Portfolio diversification has increasingly proved an unpopular and underwhelming strategy in an investment world with a seemingly insatiable appetite for the ‘Internet of Things’. However, as pandemic fears ease, the risk/reward between portfolio concentration and portfolio diversification appears poised to rotate favourably towards the latter.”

Over the six months to 30 June, the trust’s net asset value total return fell by 10.7% compared to a 4.7% fall in its benchmark. Over the same period, the share price total return fell by 18.7%, as the trust moved from a 5.9% premium to trading at a 3.7% discount. 

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The trust has struggled for form of late, sitting in the fourth quartile in its sector over one, three and five years, according to data from FE Analytics.

During the “adversity” of the last six months, Stout has been adding risk, shifting from defensive fixed income into equities where he sees the potential for long-term earnings and dividend growth.

On the income front, the board said that it intends to at least match its 2019 dividend payout of 53.5p per share, although to do this the manager may need to use some capital reserves built up over previous years.

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Kevin Carter, chairman of Murray International Trust, says:

“The board currently intends in 2020 to at least match the dividend payout of 53.5p per share in 2019. It is expected this will entail some use of the significant revenue reserves built up over prior years for occasions such as the current crisis.”

“The manager’s investment approach seeks companies which offer stable long-term earnings and dividend growth prospects in combination with management teams focused on shareholders’ interests. During the adversity of the last six months, opportunities have been taken to reallocate assets from defensive fixed-income holdings into equities with these long-term earnings and dividend growth characteristics, all within the diversified global nature of the company’s portfolio. 

“Such repositioning increases confidence in the delivery of the long-term income and growth investment objectives of the company.” 

Murray International, a high conviction global portfolio aiming for both income and capital growth, is one of interactive investor’s Super 60 funds.