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Murray Income - Uncharacteristic Premium Rating

Closed-end funds and OEICs
OllyDrod
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Murray Income - Uncharacteristic Premium Rating

#358719

Postby OllyDrod » November 21st, 2020, 12:54 pm

I note that Murray Income (MUT) ended the week at a 3% premium to NAV. The 12-month average is a -4.9% discount, giving its current rating a z-score of 3.7 ie: (very!) 'expensive'. Is this just some 'quirk' that's arisen following the merger with Perpetual, or a 'genuine' premium? It seems rather coincidental to be genuine, but I can't fathom why absorbing a relatively poor-performing rival would push MUT to a premium - particularly when the holdings in PLI have been steadily aligned with those in MUT over the last few months.

Grateful for any thoughts!

All figs from Gavin Lumsden's latest TrustWatch article:
https://citywire.co.uk/investment-trust ... s-list#i=3

- OllyDrod

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Re: Murray Income - Uncharacteristic Premium Rating

#358734

Postby Itsallaguess » November 21st, 2020, 1:18 pm

OllyDrod wrote:
I note that Murray Income (MUT) ended the week at a 3% premium to NAV. The 12-month average is a -4.9% discount, giving its current rating a z-score of 3.7 ie: (very!) 'expensive'. Is this just some 'quirk' that's arisen following the merger with Perpetual, or a 'genuine' premium? It seems rather coincidental to be genuine, but I can't fathom why absorbing a relatively poor-performing rival would push MUT to a premium - particularly when the holdings in PLI have been steadily aligned with those in MUT over the last few months.

Grateful for any thoughts!


Premium/Discount information can get a bit spiky sometimes, as we can see from the MUT chart on Trustnet -

Image

Source - https://www.trustnet.com/factsheets/t/a783/murray-income-trust-plc

I'd be tempted to take a watching brief for now, and time will tell whether this is another temporary spike, or something more permanent...

Cheers,

Itsallaguess

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Re: Murray Income - Uncharacteristic Premium Rating

#358747

Postby Dod101 » November 21st, 2020, 1:40 pm

I being a long term holder in Murray Income, am inclined to think it is at least partly due to unaccustomed publicity for it. For the last few years anyway, it has done quite well. The enlargement of the funds in Murray Income to over £1 billion will have the effect of reducing its management fee as the fee is on a sliding scale so that should produce some additional benefit. OTOH it now has Revenue Reserves which are quite modest in relation to the assets since, in taking over the assets of Perpetual it was not allowed to take the Revenue Reserves with the result that it has only its own RR to cover a fund that is now twice its original size.

I suspect that the premium will disappear before too long.

Dod

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Re: Murray Income - Uncharacteristic Premium Rating

#358775

Postby OllyDrod » November 21st, 2020, 2:52 pm

Thanks both. Just finished listening to this week's 'Weekly investment trust review' podcast from Money Makers and it was suggested that the premium was likely due to MUT being snapped up by index trackers (its enlarged size now making it a constituent of the FTSE 250). I suspect Dod's point re: publicity also has some merit to it. So, a 'genuine' premium and also a function of the merger. I've held since 2018 and am pleased with the performance but may top-slice and buy back in once the discount returns. Like Dod - I don't see this lasting.
- OllyDrod

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Re: Murray Income - Uncharacteristic Premium Rating

#358783

Postby Arborbridge » November 21st, 2020, 3:05 pm

OllyDrod wrote:Thanks both. Just finished listening to this week's 'Weekly investment trust review' podcast from Money Makers and it was suggested that the premium was likely due to MUT being snapped up by index trackers (its enlarged size now making it a constituent of the FTSE 250). I suspect Dod's point re: publicity also has some merit to it. So, a 'genuine' premium and also a function of the merger. I've held since 2018 and am pleased with the performance but may top-slice and buy back in once the discount returns. Like Dod - I don't see this lasting.
- OllyDrod



Perhaps time for a dump and rebuy later?

I'm personally not inclined to take such actions, though. PLI left me with a large loss (about 20%), which now amusingly shows against my MUT holding with HSDL, as if in two days MUT had lost that much!
My concern about holding MUT is that while the yield is so-so the dividend growth is rather low. 6% in 5 years? (HYP= 17% until Covid) Oh well - I shan't do anything in the short term, but MUT was one I sold, now it's boomeranged back on me.

Arb.

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Re: Murray Income - Uncharacteristic Premium Rating

#358790

Postby OllyDrod » November 21st, 2020, 3:30 pm

Arborbridge wrote:
OllyDrod wrote:Thanks both. Just finished listening to this week's 'Weekly investment trust review' podcast from Money Makers and it was suggested that the premium was likely due to MUT being snapped up by index trackers (its enlarged size now making it a constituent of the FTSE 250). I suspect Dod's point re: publicity also has some merit to it. So, a 'genuine' premium and also a function of the merger. I've held since 2018 and am pleased with the performance but may top-slice and buy back in once the discount returns. Like Dod - I don't see this lasting.
- OllyDrod



Perhaps time for a dump and rebuy later?

I'm personally not inclined to take such actions, though. PLI left me with a large loss (about 20%), which now amusingly shows against my MUT holding with HSDL, as if in two days MUT had lost that much!
My concern about holding MUT is that while the yield is so-so the dividend growth is rather low. 6% in 5 years? (HYP= 17% until Covid) Oh well - I shan't do anything in the short term, but MUT was one I sold, now it's boomeranged back on me.

Arb.


Possibly! There are certainly better value options - Aberdeen Standard Equity Income (ASEI) on a -13% discount (z -1) and Shires Income (SHRS) on a -9.7% discount (z -1.63). ASEI's performance has been awful, but SHRS doesn't look too far adrift of MUT over the longer term.
- OllyDrod

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Re: Murray Income - Uncharacteristic Premium Rating

#358803

Postby Dod101 » November 21st, 2020, 4:11 pm

That is something that bothers me about Murray Income, the dividend growth because as I said it has put itself under some pressure, to the extent that either now has or is seeking to use realised capital gains to bolster the dividend if necessary. Frankly I think the main beneficiary in this takeover is the manager, Aberdeen who have just acquired about an extra £500 million of AUM.

Dod

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Re: Murray Income - Uncharacteristic Premium Rating

#358804

Postby swill453 » November 21st, 2020, 4:11 pm

Arborbridge wrote:PLI left me with a large loss (about 20%)

Don't forget you got 13p per share from the revenue reserve, which was about 5% of the final share price.

Scott.

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Re: Murray Income - Uncharacteristic Premium Rating

#358812

Postby richfool » November 21st, 2020, 4:25 pm

OllyDrod wrote:Possibly! There are certainly better value options - Aberdeen Standard Equity Income (ASEI) on a -13% discount (z -1) and Shires Income (SHRS) on a -9.7% discount (z -1.63). ASEI's performance has been awful, but SHRS doesn't look too far adrift of MUT over the longer term.
- OllyDrod

I wanted to increase my UK G&I exposure, (this last week), and as I already hold MUT, I bought some DIG.

Same stable, and similar holdings to MUT, (and a bit more AZN), but a slightly higher yield: 4.49% and still at a discount: -3.70%.

https://www.hl.co.uk/shares/shares-sear ... st-ord-25p

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Re: Murray Income - Uncharacteristic Premium Rating

#359017

Postby richfool » November 22nd, 2020, 2:33 pm

As far as an existing holder of MUT is concerned, I assume there is no change to the number of shares in their holding as a result of the trust taking on PLI?
If so, and noting that the dividends on MUT are indicated to be:-

Type Ex-div date Payment date Amount
3rd interim * 20/05/2021 17/06/2021 8.25p
2nd interim * 18/02/2021 18/03/2021 3.95p
1st interim * 29/10/2020 17/12/2020 12.55p

If so, I am thinking why shouldn't I top slice some of my holding of MUT in order to avoid the reduced dividend scheduled to be paid on 18/3/2021 (ex div: 18/02/2021)? I could then top up another trust such as DIG which is unaffected by the take over adjustments and which is currently at a modest discount.

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Re: Murray Income - Uncharacteristic Premium Rating

#359026

Postby Arborbridge » November 22nd, 2020, 3:08 pm

swill453 wrote:
Arborbridge wrote:PLI left me with a large loss (about 20%)

Don't forget you got 13p per share from the revenue reserve, which was about 5% of the final share price.

Scott.


I have now accounted for that and completed my XIRR inputs for PLI. Since purchase in November 2010, I've had a return of 4.09% pa. Not at all good considering the average yield over that time has been around 4%, but not a total disaster. The dividends were in effect bought from eroding my capital.

MUT I sold in 2018 and I'm a holder again. It was sold because it was consistently below the average XIRR return for my basket of ITs, though interestingly, the XIRR was 6.77% when I sold.
DIG was sold in 2016 and achieved an XIRR of 8.03%.

What I find thought provoking is that both DIG and MUT were sold because for years their XIRR had not once come up to my average, yet those XIRRs compare quite well with my current average of 7%. I think it shows what a knock the market has had.

Arb.

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Re: Murray Income - Uncharacteristic Premium Rating

#359030

Postby Dod101 » November 22nd, 2020, 3:30 pm

richfool wrote:As far as an existing holder of MUT is concerned, I assume there is no change to the number of shares in their holding as a result of the trust taking on PLI?
If so, and noting that the dividends on MUT are indicated to be:-

Type Ex-div date Payment date Amount
3rd interim * 20/05/2021 17/06/2021 8.25p
2nd interim * 18/02/2021 18/03/2021 3.95p
1st interim * 29/10/2020 17/12/2020 12.55p

If so, I am thinking why shouldn't I top slice some of my holding of MUT in order to avoid the reduced dividend scheduled to be paid on 18/3/2021 (ex div: 18/02/2021)? I could then top up another trust such as DIG which is unaffected by the take over adjustments and which is currently at a modest discount.



If you think it is worthwhile why not? I am more interested in why they have brought forward part of the 2nd Interim to pay it this calendar year. Thinking about it is so as to deliberately reward the original shareholders as the ex div date is 29 October, before the new shareholders came on board. Bravo!

The total of the three interims is the same as last year so for existing shareholders there is no difference.

Dod

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Re: Murray Income - Uncharacteristic Premium Rating

#359041

Postby swill453 » November 22nd, 2020, 4:52 pm

richfool wrote:As far as an existing holder of MUT is concerned, I assume there is no change to the number of shares in their holding as a result of the trust taking on PLI?
If so, and noting that the dividends on MUT are indicated to be:-

Type Ex-div date Payment date Amount
3rd interim * 20/05/2021 17/06/2021 8.25p
2nd interim * 18/02/2021 18/03/2021 3.95p
1st interim * 29/10/2020 17/12/2020 12.55p

If so, I am thinking why shouldn't I top slice some of my holding of MUT in order to avoid the reduced dividend scheduled to be paid on 18/3/2021 (ex div: 18/02/2021)? I could then top up another trust such as DIG which is unaffected by the take over adjustments and which is currently at a modest discount.

This was something I wasn't really aware of from the PLI takeover timetable. The December MUT dividend went ex- a month earlier than usual this year, so former PLI holders won't get that. Then the March dividend looks like it will be less than half of MUT's "normal". So not much income for a while really.

Scott.

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Re: Murray Income - Uncharacteristic Premium Rating

#359052

Postby dealtn » November 22nd, 2020, 5:46 pm

Never owned a IT, or a UT come to that, so perhaps someone can explain to me the mechanics out of curiosity how do premium/discount calculations work? Is it literally calculated daily from the share prices of all the underlyings and applied and compared to the market price of the IT? Or is it done infrequently and so some of the discount/premium reflects out of date input prices?

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Re: Murray Income - Uncharacteristic Premium Rating

#359079

Postby staffordian » November 22nd, 2020, 8:04 pm

dealtn wrote:Never owned a IT, or a UT come to that, so perhaps someone can explain to me the mechanics out of curiosity how do premium/discount calculations work? Is it literally calculated daily from the share prices of all the underlyings and applied and compared to the market price of the IT? Or is it done infrequently and so some of the discount/premium reflects out of date input prices?

As I understand it, most ITs calculate and publish this regularly. Possibly daily?

Where it's not so clear cut is when an IT holds relatively illiquid assets, where the valuation is perhaps somewhat subjective.

In this case the premium or discount is also, of course, a little subjective..

I have to say that even though my investments are ITs, and I am still building, I (perhaps foolishly) take little notice of this. I have a basket of ITs and unless something untoward happens, I simply top them up in turn, generally going in order of yield.

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Re: Murray Income - Uncharacteristic Premium Rating

#359081

Postby OldPlodder » November 22nd, 2020, 8:12 pm

Here is an example (daily, thus data as of last close, is very common):

https://www.londonstockexchange.com/new ... s/14763851

Plodder

Disc Never held this particular IT

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Re: Murray Income - Uncharacteristic Premium Rating

#359085

Postby OllyDrod » November 22nd, 2020, 8:41 pm

dealtn wrote:Never owned a IT, or a UT come to that, so perhaps someone can explain to me the mechanics out of curiosity how do premium/discount calculations work? Is it literally calculated daily from the share prices of all the underlyings and applied and compared to the market price of the IT? Or is it done infrequently and so some of the discount/premium reflects out of date input prices?


Can highly recommend Citywire's Gavin Lumsden and his 'Gavatar' videos for an overview of the basics of investment trusts. The two below cover discounts:
https://citywire.co.uk/investment-trust ... s/a1186383
https://citywire.co.uk/investment-trust ... s/a1154514

- OllyDrod

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Re: Murray Income - Uncharacteristic Premium Rating

#359086

Postby richfool » November 22nd, 2020, 9:13 pm

swill453 wrote:
richfool wrote:As far as an existing holder of MUT is concerned, I assume there is no change to the number of shares in their holding as a result of the trust taking on PLI?
If so, and noting that the dividends on MUT are indicated to be:-

Type Ex-div date Payment date Amount
3rd interim * 20/05/2021 17/06/2021 8.25p
2nd interim * 18/02/2021 18/03/2021 3.95p
1st interim * 29/10/2020 17/12/2020 12.55p

If so, I am thinking why shouldn't I top slice some of my holding of MUT in order to avoid the reduced dividend scheduled to be paid on 18/3/2021 (ex div: 18/02/2021)? I could then top up another trust such as DIG which is unaffected by the take over adjustments and which is currently at a modest discount.

This was something I wasn't really aware of from the PLI takeover timetable. The December MUT dividend went ex- a month earlier than usual this year, so former PLI holders won't get that. Then the March dividend looks like it will be less than half of MUT's "normal". So not much income for a while really.

Scott.

(My bold above). Well yes, exactly, so I am suggesting, selling some of my MUT and redeploying it into another trust such as DIG. Is there anything I've missed there? Is DIG a reasonable alternative? One could get 6.4% investing in Merchants, but that generally has a poorer capital performance and I don't like its holdings so much.

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Re: Murray Income - Uncharacteristic Premium Rating

#359090

Postby OllyDrod » November 22nd, 2020, 9:32 pm

richfool wrote:(My bold above). Well yes, exactly, so I am suggesting, selling some of my MUT and redeploying it into another trust such as DIG. Is there anything I've missed there? Is DIG a reasonable alternative? One could get 6.4% investing in Merchants, but that generally has a poorer capital performance and I don't like its holdings so much.


I don't think you've missed anything - I'll be trimming my MUT position tomorrow. DIG looks like a good alternative, although its discount's already come in a long way recently. I'm overweight UK at the moment, so may simply keep the proceeds as dry powder for now.
- OllyDrod

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Re: Murray Income - Uncharacteristic Premium Rating

#359217

Postby Eboli » November 23rd, 2020, 10:27 am

Dod noted:

I am more interested in why they have brought forward part of the 2nd Interim to pay it this calendar year. Thinking about it is so as to deliberately reward the original shareholders as the ex div date is 29 October, before the new shareholders came on board. Bravo!


In one of the documents sent round to PLI shareholders I think it was suggested that because PLI were paying a special 13p dividend to represent the capital reserve value and that a similar exercise was being done for MUT shareholders effectively transferring to them 4.3p representing reserve values before MUT issued shares to PLI exes on 18/11.

Eb.


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