Picking the wrong UK shares in 2018 dented the performance of the £1.6bn Murray International investment trust.
The trust invests in global equities and the manager, Bruce Stout, has long had a cautious outlook on the world economy, describing equity market conditions over the past decade as a "mania", as investors mistook the boost to asset prices from quantitative easing and elevated debt levels for a strong rate of economic growth.
Despite his caution, the trust lost 7.5 per cent during 2018, compared with a 6.7 per cent loss for the average trust in the AIC Global Equity Income sector in the same time period.
Mr Stout said that while the stocks he selected in Europe helped performance by returning better than the market average, the opposite was the case in the UK.
Of the UK he said: "Despite historically low portfolio exposure and emphasis on companies skewed to overseas earnings, UK equity investment proved extremely disappointing.
"Only BHP Group (formerly BHP Billiton) and Royal Dutch Shell delivered above market returns despite neither conforming to typecast of typical defensive businesses. For BAT, Weir Group and Vodafone it was a year to forget and move on.
"It would be futile to attempt rational analysis of an economy and corporate landscape in which intangibles reign supreme. Only when the UK/European issue is done and dusted can the damage be truly assessed.
"The much vaunted normalisation of UK interest rates remains as elusive as ever yet in truth no-one knows what normal interest rates might be for a chronically indebted foreign-capital dependent economy like the UK.
"In the meantime hard earned savings are eaten away by inflation, real incomes decline, the corporate sector remains suspended in a vacuum and Britain's long term viability and reputation as a place to do business diminishes. From a global perspective the argument to invest has seldom been so uncompelling."
Data from FE Analytics showed 10 per cent of the trust’s capital is invested in the UK, while its largest exposure is to the Asia Pacific region, which represents 32 per cent of the trust's holdings.
In his statement accompanying the annual results Mr Stout wrote that emerging market investments were helpful to performance.
Over the past three years the Murray International trust has returned 51.36 per cent, while the AIC Global Equity Income sector returned 46.68 per cent.
david.thorpe@ft.com
