US and Japan underweights see Murray International underperform

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The Murray International investment trust has failed to beat its benchmark over the first half of the year as a result of underweight positions in the US and Japan, as well as an overweight in Brazil.

The £1.5bn trust’s half year results reveal that its 9.3 per cent net asset value return lagged behind a 12.4 per cent rise on its benchmark, which is a composite of 40 per cent FTSE World UK and 60 per cent FTSE World ex UK

The same period also saw the trust’s premium narrow “slightly” following a share price rise of 9 per cent, according to the results.

Murray International chairman Kevin Carter attributes the benchmark underperformance over the last six months to asset allocation as well as stock selection.

He says: “Exposure to Brazil proved negative from both an asset allocation and currency stand-point, although strong stock selection in the Latin American region did partially offset this weakness.  

“The significant underweight position in North America proved very negative on an asset allocation basis, as this benchmark heavyweight returned over 20 per cent in sterling terms over the period.  The underweight position in Japanese equities also detracted from performance.”

Carter adds that fixed income exposure resulted in a drag on relative performance but did not result in losses.

The trust issued £330m of new shares during the first half of 2013 at a premium to the share price, which Carter says helped to improve liquidity and enchance the NAV slightly.

During June the trust agreed a new £120m loan with Royal Bank of Scotland, drawn down in two £60m tranches repayable in four and five years time, with interest all-in rates at 2.21 per cent and 2.575 per cent respectively. Murray International had net gearing of 12.2 per cent at the end of 2013’s first half.

The Alternative Investment Fund Managers Directive brought into effect during July 2013 will result in “significant consequences” including increased compliance and regulatory costs for the trust, says Carter.

He adds: “The board is in discussions with the manager and other service providers concerning the implementation of the directive, and will notify shareholders when exact details have been finalised.”