Will this di­ver­si­fied fund re­cover when the tech stock ob­ses­sion starts to wane?

The man­ager of Murray In­ter­na­tional thinks the mar­ket has be­come starkly po­larised and is poised to re­gain its bal­ance

The Daily Telegraph - Business - - Business - RICHARD EVANS Read Questor’s rules of in­vest­ment be­fore you fol­low our tips: tele­graph.co.uk/go/ questor­rules; twit­ter.com/DTquestor

A “NO­BODY’S fault re­ces­sion” is the rather neat de­scrip­tion used for the cur­rent slump in the in­terim re­port pub­lished a week ago by one of our newer hold­ings, Murray In­ter­na­tional in­vest­ment trust.

The port­fo­lio’s man­ager, Bruce Stout of Aberdeen Stan­dard In­vest­ments, said the fact that the re­ces­sion could be blamed on the pan­demic had en­abled the au­thor­i­ties to “un­leash a flood of liq­uid­ity into fi­nan­cial mar­kets” – with “sig­nif­i­cant im­pli­ca­tions for the per­for­mance of stocks and bonds”.

Much of this money, he said, had found its way into tech­nol­ogy stocks, which were “deemed to be ben­e­fi­cia­ries of so­cial iso­la­tion”, while other parts of the stock mar­ket were shunned. One of the con­se­quences was that di­ver­si­fied port­fo­lios

such as his own had proved un­pop­u­lar “in an in­vest­ment world with a seem­ingly in­sa­tiable ap­petite for the internet of things”. This is ap­par­ent from a glance at a graph of Murray In­ter­na­tional’s share price, which has been roughly flat since early April af­ter an ini­tial re­cov­ery from the trough of the coro­n­avirus crash pe­tered out. Port­fo­lios that con­tain plenty of tech­nol­ogy stocks have fared much bet­ter: the share price graph of Scot­tish Mort­gage, for ex­am­ple, has risen steeply and more or less con­tin­u­ously since the mar­ket bot­tomed out.

Mr Stout sus­pected that the mar­ket would not re­main in such a po­larised state for long, how­ever. “As pan­demic fears ease, the risk-re­ward bal­ance be­tween port­fo­lio con­cen­tra­tion and port­fo­lio di­ver­si­fi­ca­tion ap­pears poised to ro­tate favourably to­wards the lat­ter,” he con­cluded. We, as hold­ers of his trust, must hope so, al­though our pri­mary in­ter­est is of course in the in­come it pays. On this front we can be con­tent.

The trust has de­clared two in­terim div­i­dends of 12p each for the six months to June 30. The first was paid a week ago, while the sec­ond is due to be paid on Nov 19. The chair­man,

Kevin Carter, said the board in­tended to “main­tain a pro­gres­sive div­i­dend pol­icy” and would use its re­serves to do so if nec­es­sary.

His ex­pla­na­tion chimes with Questor’s views on in­vest­ment trusts’ re­serves, as ex­pressed in one of our re­cent What­sApp au­dio up­dates, and is worth re­port­ing. “In some years rev­enue will be added to re­serves while in oth­ers rev­enue may be taken from re­serves to sup­ple­ment earned rev­enue for that year to pay the an­nual div­i­dend,” Mr Carter said.

“Share­hold­ers should not be sur­prised or con­cerned by ei­ther out­come as, over time, the com­pany will aim to pay out what the un­der­ly­ing port­fo­lio earns.”

He added that the board “cur­rently in­tends in 2020 at least to match the div­i­dend pay­out of 53.5p per share in 2019”, which he ex­pected to en­tail some use of the re­serves “built up over prior years for oc­ca­sions such as the cur­rent cri­sis”.

At the end of June 2020 the re­serves amounted to £69.6m. For com­par­i­son, the cash spent on divis paid in the first half (as op­posed to those de­clared) came to £38.2m.

It’s worth not­ing that much of the poor per­for­mance of the shares so far this year is down to a widen­ing in the dis­count. We will hold.

Up­date: Sirius Real Es­tate

This trust, which owns com­mer­cial prop­erty in Ger­many, is­sued an up­date last week on its rent col­lec­tion dur­ing the pan­demic – a statis­tic read­ers will be get­ting very used to see­ing in cov­er­age of our prop­erty-heavy port­fo­lio.

At the end of last month the fund had col­lected 95.9pc of the rent and ser­vice charges due for the pe­riod be­tween April and June, com­pared with 98.2pc last year. It said most of the un­col­lected debt re­lated to 41 tenants out of a to­tal of about 5,000.

It said that be­tween April and July it had re­ceived 6.7pc more in­quiries from prospec­tive tenants than in the same pe­riod last year. Hold.

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