Bruce Stout adopts ultra low bond weighting

The manager said bonds were too expensive currently and he refuses to “pay over par”.

“Fixed income is very expensive,” he said. “Corporate bonds in our opinion are very expensive and yields are very low.

“I am only interested in bonds below par and it is difficult to find any quality with any value.”

As of December 31, the trust was just 8.5 per cent invested in fixed income, with 91.5 per cent in equities and the remainder in cash.

The manager also has an aggressive weighting in Asia Pacific equities.

“Asia Pacific is a good region, although it is not important any more where a company is domiciled,” he said.

The manager predicted that economically sensitive stocks, including industrials and minerals, would suffer dividend cuts in 2012, so he is remaining very defensively positioned.

“The crushing reality of anaemic growth in the developed world, stubbornly high unemployment and private sector de-leveraging is slowly being recognised as ‘normal’ in the wake of the global credit bubble collapse,” he said.

“Unfortunately such conditions may prevail for some considerable time. Consequently the portfolio remains defensively positioned in quality companies with solid dividend growth prospects.”

Shares of the Murray International trust have traded at a premium to its underlying net asset value (NAV) per share consistently in recent months.

Last year, the board announced a £71m new share issue, in a bid to rein in the premium. As of January 30, the trust was trading at a share price of 943p, representing a 4.2 per cent premium to NAV.

In the past five years, the trust’s underlying portfolio has grown by 76.8 per cent, while the shares have risen by 59 per cent.

This compares to the fund’s composite benchmark, made up of 40 per cent FTSE World UK and 60 per cent FTSE World ex UK, which has returned just 14.4 per cent.

Mr Stout’s trust was awarded the top ‘gold’ rating by Morningstar last month as the agency launched its investment trust ratings service.

Simon Elliott, head of investment trust research at Winterflood Securities, said he expected the trust to continue to outperform regardless of market conditions.

“Given the fund’s level of gearing, low US exposure and significant exposure to Asia and emerging markets, it might have been expected to underperform in 2011,” he said.

“However, Bruce Stout is a genuine stockpicker, and this is reflected in the NAV outperformance over the year.”