MURRAY Income Trust’s managers highlighted a “sharp style rotation within the equity market favouring value at the expense of quality and growth companies which tend to have a longer duration of earnings” as the fund unveiled results yesterday.

Charles Luke and Iain Pyle observed “concept” stocks “mostly in the technology sector with little or no cashflows have been particularly affected” by this “rotation”. Murray Income achieved a total return on net asset value of 7.2% in the six months to December. This was ahead of a 6.5% return on the UK All-Share Index.

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Mr Luke and Mr Pyle, of fund management group abrdn, said: “Catalysed by hawkish signals from the Fed given concerns around the inflation outlook, real bond yields have risen since the start of the calendar year. This has resulted in a sharp style rotation within the equity market favouring value at the expense of quality and growth companies which tend to have a longer duration of earnings while ‘concept’ stocks (mostly in the technology sector) with little or no cashflows have been particularly affected.

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“Macro influences can have a salient impact on share prices in the short term but we are reminded of the saying attributed to the famous investor Benjamin Graham that ‘in the short run the market is a voting machine, but in the long run it is a weighing machine’ or in other words long term share price performance will reflect the fundamentals of the businesses that we invest in and that is certainly borne out empirically.”

They added: “At the time of writing, the Russian invasion of Ukraine has just commenced for which the outcome and consequences are currently unknown. However, for now, our baseline forecasts are for global growth to remain above trend in 2022, helped by a rebound from the Omicron headwind. For the UK, in particular, the backdrop is generally supportive with pent-up demand and a fast booster rollout, albeit the prospect of higher utility bills weighing on consumer disposable income and other less benign inflationary pressures are increasingly areas of concern.

“We take comfort that the valuations of UK-listed companies remain attractive on a relative basis and as such we think a fair proportion of the portfolio may be vulnerable to corporate activity. Moreover, the dividend yield of the UK market remains at an appealing premium to other regional equity markets let alone other asset classes. Furthermore, international investors remain underweight the UK providing a further underpin. Therefore, we feel very comfortable maintaining our long term focus on investments in high quality companies capable of sustainable earnings and dividend growth.”