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MURRAY INCOME CONFIDENCE: Twice the size, but the cost is lower

MURRAY INCOME CONFIDENCE: Will double in size as it absorbs assets from rival perpetual income and growth

Investment fund Murray Income will double in size next month as it absorbs the assets of the rival fund Perpetual Income and Growth, as expected.

The move – which is likely to turn Murray Income into a £ 1 billion plus fund – means that investment policy will not change, with the trust’s focus remaining on obtaining a combination of income and capital growth from a portfolio consisting mainly of UK shares exists.

It will also not change the composition of Murray Income’s existing portfolio as the assets transferred from the Perpetual trust will be held in the same stock.

In recent weeks, Perpetual Income and Growth’s portfolio has been realigned with that of Murray Income, a process that has resulted in all but 10 of the 60 holdings being sold with the proceeds used to buy shares that were already in Murray Income.

For investors in the £ 642 million Perpetual Fund, one of the main benefits of the move is access to a fund manager – Charles Luke – who has built an impressive record of performance with Murray Income since taking the helm in 2006. Luke, a senior investment director at Aberdeen Standard, has done this by investing in a diversified portfolio of quality companies, including companies listed outside the UK. The trust has a record 47 years of income growth and despite the disruption to dividends in the UK due to the coronavirus, the board of directors is confident it can continue.

In contrast, perpetual income and growth has failed shareholders in recent years. In April last year, his manager – Invesco’s Mark Barnett – was unceremoniously fired by the board of directors due to a “prolonged period of underperformance.”

Although a new manager – Martin Walker – was hired by Invesco to turn things around, the trust’s fortunes did not continue to improve. Hence the decision to agree to merge the trust in Murray Income. As the chart below shows, Murray Income has outperformed the Perpetual trust by a land mile over the past five years – gaining 38 percent versus losses of 28 percent.

While Murray Income and Perpetual shareholders will be asked to approve the merger of the two trusts, they are unlikely to decline. This is because the move will result in the combined fund having lower ongoing annual costs. It will drop from 0.65 percent to 0.5 percent.

Charles Luke says it will be business as usual once the two trusts merge with a portfolio of 57 holdings. It includes dividend favorites such as Unilever, Diageo and National Grid, as well as some foreign holdings, such as the Finnish elevator company Kone.

While Luke says the trust’s income has come under pressure this year, adding dividend payments to shareholders from reserves, it has proven to be much more “ resilient ” than the broader market. It has already set out its dividend strategy for the coming fiscal year with the first three quarterly payments of 12.55p, 3.95p and 8.25p per share respectively. The final two payments will be paid to shareholders who have come over from Perpetual.

Murray Income chairman Neil Rogan says combining the two trusts is good for both Murray Income and Perpetual Income & Growth investors. “It’s good for our shareholders because of lower costs, while Perpetual Income & Growth shareholders will benefit from both a better manager and lower fees,” he says.