The recent surge in markets should be met with scepticism, not optimism, according to a number of Aberdeen’s highly rated managers, who have positioned their portfolios for a sustained period of turbulence. 

Star manager Bruce Stout, who heads up the sector-leading Murray International Trust, has been defensive since the latter part of 2010 and has no plans to change his stance. 

"Recent respite in financial markets must be viewed with great scepticism," he said.

"At the current time, when transparency is low, when harsh deflationary economic conditions are new to policymakers steeped in the past, and when the political establishment is clearly willing to indulge in perpetual bailouts regardless of the consequences, this is no time to let hopeful expectations cloud reality." 

"We remain very cautious, defensively positioned and focused on capital preservation." 

Stout, whose trust published its six-month results today, says focusing on quality companies that can grow their earnings in any environment is the only way to make money at the moment. 

"The fact we’ve managed to generate a positive capital return is surprising given the severity of the macro backdrop," he continued.

"It’s all been about the individual stocks – Unilever Indonesia, Famsa and Taiwan Mobile have all done particularly well of late." 

According to FE data, the £1.23bn trust is up 5.79 per cent over six months compared with 1.35 per cent from its composite benchmark – split 60/40 between the FTSE World ex UK and FTSE World UK – and 0.03 per cent from its IT sector average. 

It has comfortably outperformed both yardsticks over one, three, five and 10 years as well. 

The trust is currently yielding 3.84 per cent. 

Performance of trust, index and sector

Name	6m returns (%)	1-yr returns (%)	3-yr returns (%)	5-yr returns (%)	10-yr returns (%)
Murray International Trust	5.79	24.71	62.36	95.81	343.54
Benchmark	1.35	21.82	34.48	22.1	96.91
IT Global Growth & Income	0.03	8.09	46.15	20.01	146.92

Source: FE Analytics

Kevin Cater, chairman of Murray International Trust, added: 

"Given the enormous weight of monetary stimulus pumped into the global financial system, the lack of economic traction remains of great concern." 

"In the absence of growth, where this leaves the very heavily indebted, mature, consumption-based economies of the United States, the UK, Europe and Japan remains the defining issue of the day, even perhaps of the decade." 

"This suggests low growth, periods of recession, stagnant labour markets plus contracting overall incomes and living standards for the foreseeable future. Against this backdrop, securing positive financial returns could prove difficult near-term."

Charles Luke, manager of Murray Income, has also sought to protect his portfolio from the numerous macro headwinds. 

"The outlook in Europe is likely to remain difficult given the actions required for enduring, sustainable growth," he said. 

"Firstly, looking at the banks, we'll probably need a deposit guarantee scheme, common supervision and nobody can rule out future recapitalisations."

"Secondly, Germany needs to commit to support the most indebted nations with a system of fiscal transfers and probably eurobonds." 

"Thirdly, we need to see sufficient structural reforms to encourage competition and liberalise employment markets. Ultimately, full federalism may well be required and we're still very far away from that." 

"There are still a lot of hurdles and volatility on the horizon. This is why the quality aspect of our investment process is extremely important." 

Luke believes UK large caps provide greater stability than those lower down the spectrum.

"Previously we have had a greater exposure to the FTSE 250, but we believe that larger companies, with typically globally diversified revenues and strong balance sheets are better positioned to address this challenging environment.” 

He currently has 80 per cent of his assets in the FTSE 100, 10 per cent in the FTSE 250 and 10 per cent in large caps not domiciled in the UK. 

Stout, Cater and Luke’s views echo those of FE Alpha Manager Martin Gray, who said in a recent interview with FE Trustnet that the market rally has been based on false expectations.