Friday, 11 September 2015

Murray Income - Final Results

Murray Income Trust has been in my basket of income focussed investments trusts for several years. It has a record of increasing annual dividends in each of the past 40 years.

It has been managed by Charles Luke and his team at Aberdeen Asset Management since 2005. It is essentially a UK income trust but like several others in this sector, the management have been gradually increasing their exposure to larger, high-quality overseas listed companies. These currently make up 16% of the portfolio and include Roche, Microsoft and Nestle.

It has today issued its results for the full year to 30th June 2015 (link via Investegate).

Net asset  total return is down -2.2% and share price TR - 5.7% compared to the FTSE All Share Index increase of +2.6%. The reason for the under-performance is the share price having moved from premium to trading at a discount to NAV.

The board are proposing a final dividend of 11.0p making a total of 32.0p for the full year - an increase of just 2.4% compared to the previous year (31.25p). At the current share price of around 680p, the yield is 4.7%.

The trusts performance benefited from smaller companies exposure via holdings of Aberforth Smaller Companies Trust.

The managers policy is to buy and hold for the longer term - portfolio turnover was again very modest with just two additions - fund manager Schroders and chemical company Elementis. The portfolio currently comprises 47 holdings with the overseas exposure representing 16.5% of gross assets at the year-end.

Income generation has been better this year, partly due to the fall in the value of sterling - 50% of the holdings derive their income from the US dollars or euros. The income generated was 33.1p per share which therefore just covers the dividend of 32p. The Board say they are hoping to make more progress on increasing the dividend over the coming year and the recent pull-back of sterling against the dollar should help.

"Although the short term outlook for equity returns is likely to stay difficult, we remain sanguine about the medium to long term opportunities for the companies in the portfolio.  We believe that globally competitive businesses with strong balance sheets will prosper over the long term and ultimately offer the best earnings and dividend growth prospects".
Charles Luke.

I note that notwithstanding the poor performance, the management fees have increased and total expenses for the year are up from 0.70% to 0.83% - £4.29m including transaction charges. I don’t mind paying a little extra for out-performance but not for under-performance!

Overall, another disappointing performance for the year with the promise of a little more to come in the way of income next year. Combined with the poor performance by Murray International, my strategy transition towards lower cost index funds and ETFs is looking increasingly a good move. I took the opportunity to sell off part of my ISA holding earlier this year but will probably reluctantly hold on for the time being and hope for a turnaround in fortunes - at least I can take some comfort from the regular quarterly dividends whilst I wait!

As ever, slow and steady steps….


  1. An interesting Post, which causes me to reflect and ponder why there is such an interest in Investment Trusts, especially in the area of UK Equity Income. When I compare the results of the best from the Investment Trust & the Unit Trust/OIEC sector, there does not appear to me to be any choice but the Unit Trust/OEIC segment. For the best combination of growth and good dividends, this segment appears to outstip Investment Trusts.

    I know that there are many who will decry what I have said but I suggest that they go and look at the results from FE Trust:,UnitNameFull&Pf_sortedDirection=DESC,UnitNameFull&Pf_sortedDirection=DESC

    I don't think there is any contest for capital growth and dividend producing, especially with Neil Woodford back in the sector. I will personally continue to by and large avoid these Investment Trusts, but do select cautiously from them for selected areas for friends and continue to invest in Active funds except for USA, where I have not found any UK based managed fund that outperforms the market, so will select a Passive fund for this Region.

    I will probably be ignored/decried for my posting as it does not concur with most of your other followers, but if past history is anything to go by from previous postings - just ignored apart from you diy investor (uk)

    1. Gareth,

      Some interesting observations comparing funds and ITs. I had a quick look at the two links you provide - looks like a pretty mixed bag for both however, there are over 80 funds in the comparison and just 24 ITs so maybe you would expect a similar percentage of fund managers to provide better than average performances.

      To answer the question of why the interest in ITs, I can only speak for myself. Historically, the charges for trusts were much lower than funds - at least 0.6% on average so that was a big reason for selecting ITs. I first purchased City of London in 1995 and it has served me well over the years. More recently I have included Edinburgh and Finsbury Growth & Income which have done a better job so far than CTY (over the past 5 yrs) and have helped to counter the less good returns from the likes of Murray Income.

      The other big advantage for income seekers is the ability to smooth out the dividend income. Admittedly, this may not be such an advantage when share price performance is underperforming the benchmark!

      I suspect much will depend on what each investor becomes more familiar with using - some like ITs and others funds. Since RDR the TER on funds has reduced so maybe this is no longer such an issue between the two.

      I think the main debate is now between active or lower cost index and must admit I am coming round to embracing the latter.

      Be interested to hear what others think about the points you raise. Thanks for sharing your views - I really don't think anyone will criticise for prefering funds over ITs.

  2. DIY

    Thanks for your reply. I suppose I should give a bit about myself that will put my comments in context. I am 57 and have the necessary means to retire and pretty much have done so for the last 2 years doing some interim work/consultancy when it comes along. My wife and I now mainly live off the natural dividend yield that comes from our SIPP/ISAs, with some final salary pensions to kick in when we are 60, which we chose not to take early so there would be no actuarial reduction.

    We accumulated our wealth by using a combination of Funds & individual shares. However, for a number of years I searched for the strategy that would be right for our drawdown phase of our life. I eventually settled on using a combination of Equity Income funds and Defensive shares (split pretty much 50/50 across shares and Dividend funds with some non UK in there as well), with a target of a 4% average yield and I can say the plan has worked over the last 2 years.

    Yes in any sector there can be a mixed bag. However my point was that if you look at the "Best" and what they produce and are looking for a combination of Dividends and Growth, then I think the Unit Trusts beat the Investment Trust sector for UK Equity Income. Yes I would agree with you that Edinburgh & FGIT have done a better job than Murray, but the top ones from the Unit Trusts have done even better. As to smoothing the Dividend yield, I have always that thought this was a bit of a red herring and one of those things trotted out by the sector which I think is an irrelevance when compared to Unit Trusts. I think it is true when comparing to individual shares, which obviously can vary substantially due to market conditions, but then again I would advocate a portfolio approach to holding a reasonable number of shares so the possible volatility in dividends is probably evened out anyway except possibly in significant market crashes and dividends don't always get cut (but the bank dividends did in the crash of 2007/8 and BP when it had the Gulf of Mexico fiasco). Also it feels a bit like endowments, you can't really see what you are getting and is the smoothing hiding something?

    As to tracker funds I think they can have their place in a portfolio, but I would not use them for the UK FTSE100 market, which has failed to "grow and stabilize above" its closing high in 1999. All the evidence points to the best Active managers outperforming the FTSE100 (especially as it can tend to become dominated by certain sectors over time which seem to go bump with some regularity - Banks; Commodities) and then you've also got the FTSE250 & the FTSE small cap, which can add significant gains to ones portfolio.

    Whilst I appreciate that it is easier to select a Tracker, but from my viewpoint low cost does not always equate to quality of return, especially as most of the Online platforms were discounting before the RDR changes in one shape or form came into being, although they have helped sharpen costs even more.

    1. Gareth,

      Thanks for the background info and expanding on your previous comment.

      It sound like you have settled on a formula which works well for you - shares and funds. I believe there are many ways up the mountain and whether using trusts, trackers, funds or shares in whatever combination, I think it is important for each individual to feel comfortable with their chosen route whilst remaining open to the possibility of remaining flexible with regard to other possibilities.

      So far as performance of managed funds or trusts, there will always be managers who can outperform over extended periods - I think it is difficult for the average investor to pick out these managers at the beginning of the 'race' as it will not be until they have managed for 10+ yrs that their performance can be assessed - before then it could just be down to luck for eg.

      Also, I think it can be shortsighted to limit the selection to the UK market as the global returns will likely be better than the UK over the longer periods. I like the UK for income but more and more as a smaller proportion of a more globally balanced and diverse portfolio.

      I wish you the best of luck with your retirement plans and future investing returns

    2. This comment has been removed by the author.

  3. Investments trusts and open-ended unit trusts/OEICs are basically run by the same people using the same facts and research teams. Just look at the main fund houses (Henderson, Aberdeen, JPM) where the same manager or team will run closed-ended as well as open-ended funds. To suggest one is superior to the other is incorrect.

    The performance difference will be down to gearing and discounts. Over time that will vary - i.e. Sometimes the closed ended fund will perform better, sometimes not.

    What really matters for long term investors is cost. Here closed-ended funds win hands-down.

    1. Oh I wish it was as simple as that. This is standard information put out on all websites about investing. Not all investment houses run the same funds both in IT & Fund form. A classic example is Invesco & Edinburgh, which Neil Woodford ran for a period of time. Get the timings wrong and you can end up in very different situations between the two.

      Look at the performance tables and then judge! Costs matter but performance is still the key at the end of the day!

  4. Not the same funds Gareth. The same people, research and processes.
    What you are saying is that, as a example, Niel Woodford routinely makes worse investment decisions in his IT fund than he does for his OEIC fund. And that is replicated throughout the investment fund industry.
    Do you know how silly that sounds?

    1. I think you should review your answer before making comments such as you did. I did not in any way imply that Neil changed his process or decision making or anything else, just that these funds were not being run for the whole term as in house funds and therefore the results can be quite different due to these issues.

      I specifically referred to timings and therefore to also the NAV and pricing of ITs which can make a make a make a key difference to the return on ITs especially when they are in premium mode.

  5. Please can you clarify what you mean by:
    "these funds were not being run for the whole term as in house funds".

    1. Hi Chris S

      If you take Edinburgh, it has been run by many managers. If my information is correct it was incorporated in 1889, but that was so long ago it is not relevant to this discussion. I can't remember when it was taken over by Invesco & Neil, now Mark Barnett. However, it is a classic example of a fund not having been run by the same Investment House/Manager for the "whole term as in house funds" as it has been run by many different ones and i do remember when Neil took over there was quite a lot of excitement (so it must have been in the last few years) about it and it quickly moved into a premium to NAV. One of the advantages of ITs is their ability to hire and fire managers at will, so long as the board is independent of the Investment House, which in most cases it is, but probably not in the case of Alliance Trust!

      Therefore to compare Edinburgh to Invesco Perpetual High Income's performance would be incorrect as it was not managed by Neil for that length of time. Yes he would have applied his process to the fund when he took over, but because of his reputation many people sought to invest in Edinburgh and the Price went to a premium, whereas I continued to remain in Invesco Perpetual High Income paying a market price for the underlying investments.

      Yes there are examples of the same in essence fund being run by the same Manager/Investment House e.g. Standard Life UK Smaller companies run by Harry Nimmo and there are possible opportunities to benefit from price discrepancies between the 2, but I have better things to do with my time than continually seeking these out and not knowing whether they will actually close the gap. I think again it is one of those things "touted" by the industry, which may work, but takes a lot of time and effort to make it effective.

      So that is why I commented on your "Investments trusts and open-ended unit trusts/OEICs are basically run by the same people using the same facts and research teams".

  6. Gareth, you are missing the point.
    It is obvious that actual managers of specific funds change over time. That applies to all funds, open and closed.
    The point is that (wIth a few notable exceptions eg Caledonia, Alliance Trust) the closed ended ITs are run COLLECTIVELY AND AS AN INDUSTRY, by the same people who run open funds. That is just a fact.
    It is therefore not credible to suggest somehow the open ended funds have an inherent performance advantage.

  7. An interesting discussion guys..I don't think you are going to reach a position of agreement so I will draw a line here and call TIME!