Murray Income Trust Launches Strategic Review After Persistent Underperformance

Murray Income Trust’s strategic review: what’s on the table and why it matters

Murray Income Trust has drawn a line in the sand. After several years of lagging the FTSE All-Share, the Board has launched a strategic review to “deliver improved performance and returns” with an outcome expected in the fourth quarter of 2025. The review is considering proposals from the incumbent manager (abrdn), rival investment managers and even other investment companies. Since the announcement, the discount has tightened – from 9.6% at year end to 6.9% by 8 September – and the share price total return from 30 June to 8 September was 5.9% versus 5.3% for the index.

In plain English: the Board is openly weighing change. That could mean a refreshed mandate, a manager switch or some form of corporate action. We do not yet know which. What we do know is that the discount is sensitive to the prospect of a better future.

Annual results to 30 June 2025: the scorecard

The year was another tough one for the Trust’s quality-income style. NAV total return came in at 2.7% and the share price total return was 4.3%, both behind the FTSE All-Share at 11.2%. Underperformance persists over one, three, five and ten years.

Metric	2025	2024
NAV total return (debt at fair value)	+2.7%	+9.9%
Share price total return	+4.3%	+7.6%
Benchmark total return (FTSE All-Share)	+11.2%	+13.0%
Discount to NAV (fair value)	9.6%	10.5%
Dividend per share	40.00p	38.50p
Earnings per share (revenue)	38.6p	37.4p
Dividend cover	0.97x	0.97x
Dividend yield	4.7%	4.5%
Ongoing charges	0.48%	0.50%
Net gearing	11.0%	9.0%
Market capitalisation	£836.2 million	£897.2 million

Why performance lagged: quality headwinds, style skews and stock gaps

The manager pins the gap largely on style. Rising real yields over the last couple of years have hurt longer duration, high quality equities and boosted Value sectors like banks. The Trust is run with a quality-income growth bias, is underweight Financials and Energy, avoids tobacco on ESG grounds, and has a healthy mid cap tilt – all three were headwinds. The team also admits some exit timing has been suboptimal and says the process has been tightened.

Attribution backs this up. Relative performance was dragged by Industrials, Financials and Consumer Staples, and by underweights or non-holdings in names such as Rolls-Royce and British American Tobacco. On the positive side, the Trust benefited from Shell (underweight), Glencore, AstraZeneca, DBS and Games Workshop.

Dividend hero status intact – with nuance

The Board delivered a 3.9% increase in the annual dividend to 40.00p – the 52nd consecutive annual rise. Earnings per share were 38.6p, so the dividend was again 97% covered. Revenue reserves cover 54% of the current annual dividend, down slightly from 55% last year. For income investors, that’s still decent headroom, but not bottomless. The declared fourth interim dividend of 11.5p was paid on 11 September 2025.

Discount, buybacks and what they mean for you

The Trust bought back 6.8 million shares during the year, 6.5% of the starting share count, at an average 10.9% discount. Buybacks added roughly 0.7% to NAV total return and helped trim the gap between price and NAV. The sector-wide picture is similar: robust buyback activity and slowly improving discounts through 2025. The Trust will again seek approval to continue buybacks and to issue shares if it ever trades at a consistent premium.

My take: the discount is a key part of the investment case. A credible outcome to the strategic review is a plausible catalyst for further narrowing, but it cuts both ways – a disappointing outcome could widen it. Timeframes matter here.

Costs, gearing and balance sheet

Costs have edged down with a reduced fee scale from 1 July 2024. Ongoing charges were 0.48%. Net gearing was 11.0% at year end. The Trust has £100 million of fixed-rate loan notes – £40 million at 2.51% maturing in 2027 and £60 million at 4.37% maturing in 2029 – plus a £30 million revolving credit facility with £6.1 million drawn at year end. The weighted interest cost on the loan notes is 3.6%.

Portfolio moves: tilting into quality at lower prices

Turnover on an underlying basis remains low, but there were notable changes funded in part by buybacks:

• New positions included ASML, Bunzl, DBS, Dunelm, Gamma Communications, LondonMetric, Reckitt Benckiser, Rio Tinto, Shell and Telecom Plus.
• Sold positions included BHP, BP, Coca-Cola Hellenic, Direct Line, GSK, LVMH, Novo Nordisk, Oversea-Chinese Banking Corp, OSB and VAT.
• Top ten holdings at year end: RELX, AstraZeneca, National Grid, Unilever, Diageo, TotalEnergies, Convatec, Experian, HSBC and DBS.

The manager argues the portfolio trades on 14.5x earnings versus 13.5x for the index, justified by superior returns on capital, and estimates around a 20% discount to intrinsic value on their analysis. They see particular opportunity in quality UK mid caps.

What the strategic review could change

The Board has engaged with abrdn and competing candidates. Options under consideration include management arrangements and potentially broader strategic options. The aim is simple: improve performance while keeping an attractive dividend from a UK equities-led portfolio. Expect an update in the fourth quarter of 2025.

Why this matters: persistent underperformance has weighed on sentiment and the rating. A clear, credible plan – whether that is a refreshed process, new steward, or a combination – could reset expectations. The discount’s sharp improvement after July hints at the market’s appetite for change.

Positives I see

• Shareholder-friendly actions – buybacks and a long dividend record – continue. Dividend yield is 4.7%.
• Costs are competitive at 0.48% after the fee cut.
• The discount offers potential upside if the review lands well. It was 9.6% at year end and 6.9% by early September.
• Style backdrop might turn. If real yields ease and quality steadies, relative performance could improve.

What to watch and the key risks

• Underperformance risk – the Trust trails over 1, 3, 5 and 10 years. A style tailwind alone may not fix process issues.
• Dividend cover – earnings were just shy of the payout and reserves cover 54% of one year’s dividend. It is fine today, but it bears monitoring.
• Gearing – net gearing of 11.0% will amplify outcomes in both directions.
• Strategic review execution – uncertainty persists until the Board selects and implements an outcome.

Jargon buster

• NAV total return – the percentage change in net asset value including reinvested dividends.
• Discount – how far the share price sits below the NAV. A 10% discount means £1 of assets costs 90p.
• Gearing – borrowing to invest. It boosts gains in rising markets and magnifies losses when markets fall.
• Ongoing charges – the recurring annual cost of running the trust as a percentage of average net assets.

Bottom line: is Murray Income interesting now?

For income-first investors, Murray Income still offers a 4.7% yield and the rare 52-year record of dividend growth. For value seekers, the discount remains material and has been responsive to the strategic review. The flip side is clear too: performance needs to improve, and the outcome of the review is not yet known.

If you believe a pivot to quality and mid caps is coming and you like the prospect of a narrowing discount, this is one to watch closely into the fourth quarter. If you require proven relative performance before buying, the decisive moment is still ahead.