13 Questions for Murray Income Trust’s Charles Luke

Which
Sector
Shows
the
Biggest
Promise
in
2024?

I
find
this
a
bit
tricky
to
answer
as
I
try
and
focus
on
the
long
term.
Indeed,
if
you
look
at
the
best
performing
companies
in
the
UK
market
over
the
long
term
they
are
not
grouped
in
any
particular
sector.
They
are
however
characterised
by
their
ability
to
generate
high
returns
on
capital
and
reinvest
to
grow
their
earnings.
This
would
suggest
that
maintaining
a
diversified
portfolio
of
good
quality
companies
is
perhaps
more
attractive
than
focusing
on
a
particular
sector,
at
least
over
an
extended
time
period.

What’s
the
Biggest
Economic
Risk
Today?

I
worry
more
about
companies
than
economic
risks
but
perhaps
in
the
short
term
the
risk
that
inflation
proves
to
be
more
sticky
than
expected
resulting
in
higher
interest
rates
for
longer.

Describe
Your
Investment
Strategy

In
a
nutshell
my
investment
strategy
can
be
described
as
‘quality
income’.
I
try
to
marry
together
the
benefits
of
companies
with
good
quality
characteristics
–
i.e.,
those
with
strong
business
models,
robust
balance
sheets,
experienced
management
teams
and
compelling
ESG
characteristics
–
and
those
with
attractive
income
profiles,
given
that
dividend
yield
acts
as
a
valuation
backstop,
is
a
touchstone
for
the
health
of
a
company
and
reduces
agency
risk
by
encouraging
a
long-term
approach.
The
outcome
of
this
marriage
between
quality
and
income
should
be
a
portfolio
with
strong
long
term
capital
growth
potential,
and
resilient
earnings
and
income
over
the
long
term. 

Which
Investor(s)
Do
You
Admire?

I’d
like
to
mention
two
investors
for
which
there
is
a
common
theme.
Firstly,
Charlie
Munger,
who
sadly
passed
away
at
the
end
of
November.
Warren
Buffett
credits
Charlie
with
shifting
his
investment
focus
from
cheap
companies
to
high
quality
companies.
On
my
bookshelf
I
have
a
copy
of
‘Poor
Charlie’s
Almanack’
which
highlights
that
Charlie
had
a
brain
the
size
of
a
planet! 

Secondly,
Nick
Sleep,
who
is
clearly
less
well
known
but
his
Nomad
Investment
Partnership
Letters
are
absolutely
required
reading
for
anyone
interested
in
investing.
The
letters
chart
a
13-year
investment
journey
(generating
a
c.
18%
annualised
return)
that
begins
with
a
focus
on
cheap
value
stocks
or
‘cigar
butt
investing’
but
culminates
in
the
realisation
of
the
importance
of
a
company’s
business
model
and
the
quality
of
the
business.

Name
Your
Favourite
‘Forever
Stock’

In
the
letters
mentioned
above,
Nick
Sleep
tells
a
story
about
how
relatively
early
in
his
career
he
attended
a
cocktail
party
in
New
York
populated
by
investment
professionals.
At
this
party
he
asked
one
fund
manager
what
his
largest
holding
was.
The
fund
manager
when
asked
the
question
refused
to
say
which
seemed
to
Nick
at
the
time
to
be
rude.
Having
thought
about
the
answer
for
a
year
Nick
realised
that
this
was
in
fact
the
highest
quality
answer
he
could
have
received.
The
reason
for
this
being
that
although
a
fund
manager
should
have
complete
conviction
in
their
investment
process,
they
can’t
control
how
a
company
behaves
as
businesses
evolve,
executives
change
and
mistakes
may
be
made.
Highlighting
a
favourite
stock
reduces
the
ability
to
react
objectively
to
developments. Having
said
that,
if
I
have
to
name
one
company,
I
would
of
course
say
Murray
Income
Trust.

What
Would
You
Never
Invest
In? 

Call
me
old-fashioned
but
I
struggle
to
understand
the
appeal
of
cryptocurrencies
other
than
for
nefarious
or
extremely
speculative
purposes
so
I
wouldn’t
invest
in
them.

Growth
or
Value?

I’m
going
to
say
‘quality’
because
it
offers
the
potential
to
take
the
most
appealing
aspects
of
both
growth
and
value
and
combine
those
together.
To
my
mind
investing
in
good
quality
companies
is
searching
for
those
companies
that
make
high
returns
on
capital,
benefit
from
sustainable
competitive
advantages
and
long-term
structural
growth
prospects,
and
making
sure
not
to
overpay.

House
or
Pension?

On
the
basis
that
this
is
perhaps
a
question
about
retirement
planning
(i.e.,
capital
doesn’t
need
to
be
accessed
before
retirement),
I
think
a
pension
on
the
basis
that
it
can
provide
diversified
exposure
to
different
asset
classes
which
can
compound
over
time
and
attract
tax
relief.
One
of
the
benefits
of
property
is
that
it
can
be
mortgaged
to
enhance
equity
returns
but
one
of
the
benefits
of
the
investment
trust
structure
is
the
ability
to
also
amplify
returns
by
adopting
some
leverage
which,
over
time,
should
be
beneficial.

Crypto:
Brilliant
or
Bad?

As
per
the
above:
bad.

What
Can
be
Done
to
Improve
Diversity
in
Fund
Management?

Unfortunately,
there
wouldn’t
appear
to
be
a
handy
silver
bullet
to
answer
the
question
and
diversity
can
mean
different
things
to
different
people
but
some
factors
that
might
well
be
helpful
include
ensuring
that
diversity
is
present
at
the
top
of
an
organisation,
that
diversity
is
celebrated
throughout
a
company
and
that
hiring
policies
and
information
about
the
fund
management
industry
attract
and
educate
a
broad
range
of
candidates.

Have
You
Ever
Engaged
With
a
Company
and
Been
Particularly
Proud
(or
Disappointed)
in
the
Outcome?

In
2019,
I
spent
a
lot
of
time
looking
at
the
governance
of
a
then
FTSE
100
company
called
NMC
Healthcare
and
in
particular
the
members
of
its
Audit
Committee
and
its
statutory
auditor.
My
findings
raised
serious
concerns
about
the
governance
of
the
company
and
the
risks
that
this
engendered
which
was
far
from
a
widely
held
view
at
the
time.
The
research
culminated
in
a
meeting
with
the
Joint
Chairman
and
Senior
Independent
Director
of
NMC
Healthcare
who
were
unable
to
assuage
my
worries.
At
the
time
we
were
one
of
the
largest
shareholders
in
the
company
and
were
able
to
sell
our
holding
before
a
significant
fraud
was
discovered
the
following
year
and
the
company
ended
up
in
administration
and
the
shares
being
worthless.

What’s
The
Best
Bit
of
Advice
You’ve
Ever
Been
Given?

From
an
investment
perspective
it
would
simply
be
‘never
underestimate
the
ability
of
debt
to
undermine
the
value
of
equity’.

What
Would
You
Be
if
You
Weren’t
a
Fund
Manager?

I
think
I’ve
been
incredibly
fortunate
to
pursue
a
career
that
provides
new
challenges
and
fascinating
insights
every
day. If
not
a
fund
manager
perhaps
I
might
have
been
an
accountant
with
a
focus
on
the
charities
sector.

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