The Murray Income investment trust has ditched St James’s Place and a number of other financial names amid an overhaul of the portfolio ahead of its merger with Mark Barnett’s former investment trust, Perpetual Income & Growth.
The £565.5m investment trust, managed by Charles Luke (pictured) and Iain Pyle, reported outperformance in the 12-months to 30 June with net asset value returns of -5.3% compared to -13% in the FTSE All Share. The share price fell 5.8% over the period.
In an effort to increase the portfolio’s active share and move away from the largest companies in the market, Luke and Pyle sold 17 positions during the period, including a number of financials. Turnover of 26% was therefore a little higher than the prior year.
St James’s Place was sold due to concerns around a more challenging regulatory environment, while HSBC was sold over worries it would have to cut its dividend due to Covid-19. By contrast, London Stock Exchange was sold following strong share price performance “that had left the valuation somewhat stretched”. Hiscox and Nordea were also sold.
Outside financials, the pair ditched Intercontinental Hotel Group, Experian, Signature Aviation and Hostelworld in the travel and leisure sector. Shell and Vodafone were also ousted.
In contrast, 14 holdings were introduced to the portfolio over the period, including nine mid-cap companies. These included medical devices company Convatec, National Express, John Laing and Fever Tree. In the large-cap space, French oil major Total and Coca Cola Hellenic were among the names added to the portfolio.
The overhaul comes ahead of Murray Income absorbing Perpetual Income & Growth, which Aberdeen Standard Investments won in late July after the reporting period for the annual results. The £1bn merger still must go to a shareholder vote, which the board said they would soon release more information on.
Luke already has experience repositioning the Woodford Income Focus fund, which ASI took on in February. Woodford had been a mentor to Barnett when the pair worked at Invesco and continued to share many crossholdings even after Woodford launched his own boutique.
See also: Former Woodford fund may have helped ASI cinch Mark Barnett investment trust
Reserves help Murray Income sustain dividend despite dividend cuts
Despite Luke forecasting a 14% drop in dividend holdings for 2020, the board has increased the dividend 0.7% to 34.25p. Chairman Neil Rogan said this was compared to expected cuts of 40% across the market. “The purpose of building our revenue reserves over the years is to give us the ability to smooth dividend payments to shareholders in times such as these,” Rogan said.
Revenue reserves per share dropped from 27.8p to 24.1p as a result, although Numis said in an analyst note that those reserves would be reduced by the merger.
It said: “The next year will be one of transformation for Murray Income, with the merger with Perpetual Income & Growth expected to lead to a significant increase in its size.
“The focus is on companies with strong competitive positions, balance sheets and management teams, and this quality bias has led to income being less severely impacted than the wider market, although the board is seeking to increase flexibility to distribute capital reserves, given revenue reserves per share will be reduced by the PLI merger.”
