Murray International (MYI) has released its annual results for the 12 month period ending 31 December 2023.
- Over the 12 month period MYI reported a NAV total return of 8.6% and share price total return of 1.1%. This compares to the 15.7% return of its reference index, the FTSE All World Index.
- The largest contributors to MYI’s performance were BE Semiconductor, the Dutch semiconductor manufacturer; Broadcom, the American semiconductor and digital infrastructure manufacturer; and Grupo Asur, the Mexican airport operator. In regional terms, Europe and Latin America were the largest contributors to MYI’s return, with Europe also generating positive stock selection.
- Turnover was mute over the year, at only 7%, with profits being recycled in Europe and Latin America, and a slight reduction in exposure to Asia.
- MYI’s discount widened slightly over the year, moving from a 3.1% premium at the end of 2022 to a 4.0% discount at the end of 2023.
- MYI declared dividends totalling 11.5p per share, up from the 11.2p the year prior. This dividend was fully covered by revenues, with MYI generating 12.1p per share over 2023.
- 2023 was the last financial year that MYI’s long standing lead manager, Bruce Stout, will manage the fund. He will be replaced by his assistant managers, Martin Connaghan and Samantha Fitzpatrick, who have worked with Bruce for over 20 years, and will take joint responsibility in co-managing MYI. Bruce will step down in June 2024.
- MYI’s gearing fell over the year to 8.0% at the end of 2023, after repaying a maturing loan, with £140m worth of gearing currently in place. It was not replaced due to lack of acceptable commercial terms. A £30m loan will also mature in 2024.
MYI’s managers commented:
“Forty years of relentlessly rising bond markets up until 2020 suggests very few current investment practitioners can lay claim to having witnessed a bear market in bonds. At least not in the Developed World. But even Sir Isaac Newton would not argue that the force that pulled yields downwards for four decades was in any way gravitational. The explanation here is more straightforward, the answer to be found in the abhorrent practice of printing money rather than the pages of a quantum physics textbook! Now, as every discredited Central Bank in the Developed World moves centre stage again in what financial markets currently view as crunch time for policy “leadership”, expectations are sky high. Having reacquainted themselves with the most intoxicating financial stimulant of all – hope – equity markets expect nothing less than recent history repeating itself. Such naivety simply inflates expectations without recourse to reality.
“Throughout 2023 the compulsion to hang firmly onto the belief in a return to the 2% ‘inflationary mean’ of the past decade remained all consuming. Such a delusion was not confined to just financial markets and investors either. Central Bankers in the Developed World remained evangelical in their unwavering commitment towards ‘returning to the 2% trend’. Perhaps even more incredulously, the widespread belief persisted that this would be engineered without causing economic recessions, without raising unemployment, without deteriorating asset quality and without financial dislocations despite the previous decade of misappropriate capital allocation. The harsh reality is an evolving economic and financial backdrop in which a 2% target remains totally unrealistic short of orchestrating enormous economic pain and suffering. Political practicalities of general elections across the globe in 2024 are unlikely to entertain even the thought!
“Meanwhile the sheer magnitude of leverage in the Developed World’s Government sector drives over-extended balance sheets towards breaking point, leaving Central Banks paralysed due to dwindling policy options. Such enormous leverage exposes maturing bonds to be priced by markets, where real rates of return are essential. Any compromise or attempted fudge on inflation targeting is likely to send yields spiking higher regardless of movements in short rates. Despite the market euphoria of late 2023, the transition from printing money to prudent money remains the single most important, and necessary, change to monetary conditions going forward. The money supply contractions currently being witnessed in major global economies suggest the process is already under way. Such practice has broad implications for long-term equity multiples (lower), prevailing bond yields (higher) and optimal stock selection. It is reasonable to assume equity valuations adjust to reflect real tangible value ascribed to profitability, cash flows and dividends. The implications might be lower overall returns from financial assets for the next decade simply because risk-based assets would need to compete with the not-yet-recognised costs of the stunning rise in government debt. The practicalities of securing positive real returns in such an environment could prove demanding, but through focusing on quality, real assets and broad global and sector diversification the Company maintains the flexibility to achieve its investment objectives.”