View more on these topics

New world symphony

The manager of the £1bn Murray International Investment Trust believes emerging markets have decoup led from the West and can continue with impressive growth

Now that the holiday season is over, with children back at school and share traders once again concen – trating on their screens, it seems a good moment to take stock of the market. Last week was encouraging for equity investors, although it was the US that was driving sentiment rather than good news on the home front. Indeed, gathering fears of a slowing recovery sent the pound into reverse. But shares staged something of a recovery.

It was useful to be able to canvas the views of Aber – deen’s Bruce Stout. It happened that I was unable to attend this fund manage – ment group’s annual conference in Aberdeen, so finding the manager of the £1bn Murray International Investment Trust addressing a number of JM Finn’s investment people was something of a plus. The message he delivered was mixed but encouraging nonetheless.

Such is the regard in which Murray International is held that the shares stand at a premium to asset value, despite new shares being issued regularly to satisfy investor demand.

Given that the recently published interim results disclosed a healthy outper – formance of the benchmark index and an increase in the dividend of more than 20 per cent, is it any wonder they are so sought after?

Bruce is an experienced investment manager who acknowledges that things can change and the unexpected occur. He is, though, mightily encour – aged by the way in which the so-called emerging world seems to have decoupled successfully from the over-indebted West.

He believes that Europe, Japan and the US will continue to experience a prolonged period of sub-trend economic growth but this will have little impact on the growing consumption of nations like China, Brazil and India.

Those companies selling into these nations are experiencing buoyant trading conditions and are able to raise their dividends to shareholders – an important factor in Bruce’s share selection criteria. With government bonds yielding less than 3 per cent in this country, just 2.5 per cent in America and below 1 per cent in Japan, the case for buying equities looks sound. But these low yields do paint a picture of investor concern which should not be ignored.

The main risk, he feels, is that governments will shy away from the pain of correcting an overborrowed situation and return to quantitative easing too swiftly.

With yields this low, little risk is priced in to the very bonds the West was relying on the cash-rich emerging coun tries to buy to finance their deficits. Printing money could frighten away the very inves tors the developed world needs to maintain an even keel.

And there are risks in the corporate world, too. We know from the better than expected results season that companies have acted remarkably swiftly to trim waste and rebuild balance sheets.

Balance sheets now appear so strong in some cases that they are allowing a surge in merger and acquisition activity to develop. If boards pursue this approach, rather than use their recently acquired strength to finance capital expenditure, then he can see value attrition among the predator businesses.

It was, though, an upbeat and realistic assessment of the global market from an experienced manager with his feet well and truly on the ground. The trust remains geared into the equity market. In the past, it had held bonds, but he struggled to find value in them now, following a period of strong performance.

It encouraged me to believe the real risk remained being out of the market. Bruce’s comments also reminded me how much the world has changed in a comparatively short period.

Brian Tora is a consultant to investment managers, JM Finn & Co

Recommended

AIA set to float in Hong Kong

AIA has submitted plans to float on the Hong Kong stock exchange just two months after Prudential’s failed attempt to buy the business. According to the Telegraph, the Asian arm of AIG could be on the Hong Kong stock exchange as soon as next month. The move comes after former Prudential chief executive Mark Tucker […]

5

Slattery sets up new group for women IFAs

Monetary Solutions Limited director Vivian Slattery has set up a new group of female financial advisers which aims to promote the standing ofwomen in the industry. The Woman Adviser and Broker Group aims to offer support to female advisers and is being backed by Fidelity Funds Network. It will launch on October 5 and follows […]

Hawksmoor takes bearish stance on gilts

Multi-manager Hawksmoor believes that gilts and other developed market government bonds represent poor long-term value, even though the asset class has recently outperformed. Bond investors would have benefited from rising prices in August as developed market bond yields fell. UK 10-year gilt yields decreased to 2.8 per cent and yields in Germany and Japan fell […]

2

Britain's “Forgotten Army”: The collapse in self-employed pension membership – and what to do about it

Pension scheme membership among employees has risen by more than five million in the past four years because of the policy of automatic enrolment into workplace pensions. But Britain’s army of 4.4 million self-employed people, who account for one in seven of the workforce, are not covered by automatic enrolment. Pension coverage among the self-employed […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com