This fund is well equipped to ride out Trump’s tariff storm

Questor is The Telegraph’s stockpicking column, helping you decode the markets and offering insights on where to invest.

In times of turmoil, there is a natural tendency to sit on your hands.

However, Questor feels that investors looking for a globally diversified trust – with a longstanding underweight exposure to expensive US shares – and offering decent dividends, should have a look at £1.5bn Murray International.

Murray International aims to produce an above-average and growing income. The portfolio is built from the bottom up, with a focus on good-quality companies trading on attractive valuations.

There is no attempt to manage risk relative to an index benchmark, hence the managers Martin Connaghan and Samantha Fitzpatrick felt comfortable having just a third of the portfolio in North America at the end of February, less than half its weighting in the MSCI All Countries World Index.

It is also notable that the trust has no exposure to the Magnificent Seven. The investment approach has been in place for a long time and, therefore, we are able to see how it has performed in different market conditions.

The low interest rate, easy-money environment that prevailed in the wake of the financial crash up until the rapid rise in inflation and interest rates in 2022 did not suit its style. The trust moved from the top of its global equity income peer group performance tables to the bottom.

During the tough times, the board and the managers talked to shareholders to ensure that they were onside and were pleased to find that investors valued the trust’s distinctive approach. The managers stuck to their guns and the board backed them.

More recently, the tables have turned in Murray International’s favour. The managers welcome the return to more normal levels of inflation and interest rates. They acknowledge that tariffs are a worry but say the trust’s focus on quality should come into its own as economies slow.

Murray International’s dividend has grown every year for the past 20 years. Unlike some high-profile rival funds, the trust aims to pay dividends out of the revenue that it earns, although it does have a substantial (£74.2m) revenue reserve and can dip into that when necessary. Last year, a strong pound weighed on the trust’s overseas earnings and that meant the dividend was not quite covered.

When it comes to generating the income, the trust adopts a “barbell approach”, mixing some low-yielding investments with some high-yielding ones. That means it can have some exposure to lower yielding fast-growing companies, when the managers feel that their valuations are attractive.

When the managers buy a company, they expect to hold it for several years – the average holding period is eight to ten years. However, they expect that the current turmoil will throw up opportunities to buy stocks that they have long liked but felt were too expensive.

No stock should account for more than 5pc of the portfolio, which is a good discipline to keep to. For example, this limit – and a relatively low dividend yield after a bout of strong performance – encouraged the managers to reduce the weighting in Taiwan Semiconductor recently, which is now about 25pc off the highs it hit in February this year.

Another point of differentiation for the trust versus its peers is that it has some exposure to Latin America (8.1pc of the portfolio).

The managers can draw on the resources of the trust’s investment manager Aberdeen’s global team, which includes analysts based in Sao Paolo.

As ever, Murray International’s focus is on high-quality companies. Nevertheless, over 2024, sentiment turned against the region and Walmart de Mexico, Grupo Asur, and Vale were among the largest detractors from the trust’s performance. However, Murray International’s approach means that the managers can look through short-term volatility in share prices and swings in sentiment. They point out that Wal-Mex is earning returns on invested capital of 20pc and think Grupo Asur could be in a position to pay a large special dividend.

The trust has some fixed income exposure (6.4pc of the portfolio as at the end of February). This contributes to the income account but was acquired opportunistically when interest rates were high and is being reduced as interest rates fall, which causes the capital value of these instruments to rise. The trust’s gearing is modest and cheap, its two loan notes have a blended fixed cost of 2.56pc and the first maturity is in 2031.

Not much will be immune from the impact of Trump’s tariff regime, but Questor feels that Murray International’s portfolio could be better placed than most to ride out the storm.

Relatively defensive positions in stocks such as Philip Morris (the largest position in the trust), companies that ought to benefit from the volatility such as CME (which owns a number of commodity and financial derivative exchanges), and the bias away from the American market should all work in its favour.

Questor says: buy 
Ticker: MYI 
Share price: 241p

Read the latest Questor column on telegraph.co.uk every weekday at 5am. Read Questor’s rules of investment before you follow our tips.

James Carthew is head of investment company research at QuotedData