Forget trying to make money in this climate — just don't lose any: Aberdeen's Stout

Bruce Stout's investments in stocks and bonds worldwide made his fund a top performer during the past five years. Now, he's trying to preserve capital as policy makers run out of ways to stimulate their economies. The manager of Aberdeen Asset Management Plc's 985 million- pound ($1.62 billion) Murray International Trust expects developed economies to “muddle through” the next decade, with “barely positive” rates of growth, he said in an interview at his office in Edinburgh. “People are getting used to the fact that there are no more rabbits to be pulled out of the hat in terms of trying a quick fix, and adjusting your standard of living downwards is a very painful process,” Stout said. Central bankers from around the world are preparing to meet in Jackson Hole, Wyoming, this week to consider ways of preventing developed economies sliding back into recession. The rout in stocks the past four weeks has wiped more than $8 trillion from market values and the MSCI World (MXWO) Index is close to its lowest in almost a year. “We don't think we can make any money -- we're trying not to lose money in this environment,” Stout said. “And if you don't want to lose any money, what are safe havens?” Growth, Income The Murray International Trust was founded in 1907 for wealthy Scots to invest in railroad bonds across the Americas. It's the best-performer of eight comparable closed-end funds over the past five years, according to data from Chicago- based research firm Morningstar Inc. Each so-called global growth and income fund invests worldwide in companies that pay dividends as well as providing returns on their stock. The trust returned 84.8 percent in the five years to Aug. 16 compared with the average in its peer group of 38.4 percent, figures from Morningstar showed. It ranked second in a three- year time span, while this year it's slipped to fifth place, losing 3.6 percent. “This negative sentiment is not finished yet. There are a lot of hideous things still to come out,” Stout said. “The public in the developed world hasn't fully grasped the concept of austerity and it's a painful thing that takes a long time.” Record-low yields on U.S. Treasuries that show traders expect Federal Reserve Chairman Ben S. Bernanke to signal a third round of asset purchases. The yield on the 10-year Treasury has fallen 42 basis points, or 0.42 percentage point, to 2.14 percent since Aug. 5 when Standard & Poor's Ratings Services cut the U.S.'s AAA credit rating for the first time because of the record budget deficit. S&P had said earlier that anything less than $4 trillion in cuts would jeopardize the rating. ‘Psychological Importance' Bond yields can fall further because the economic outlook is so poor, Stout said on Aug. 17. “The downgrade is of more historical and psychological importance,” said Stout, 52. “It won't get its AAA status back in my lifetime. How do you fix a budget deficit like that?” Stout said he bought and sold the fewest securities for a decade in the first six months of this year. He invested in HSBC Holdings Plc (HSBA), Europe's largest lender and the first U.K. bank the trust has owned since selling out of the stock in 2004 following its acquisition of Household International Inc. in the U.S. HSBC shares have lost 21 percent this year. Last year, Stout bought or added to Nestle SA (NESN), the world's biggest food company, and Swiss drug makers Novartis AG (NOVN) and Roche Holding AG. (ROG) The fund has benefited as the Swiss franc gained 12 percent against the pound this year while their shares are all down. At the same time, he sold shares in companies including miner Rio Tinto Plc (RIO), which is down 24 percent in 2011. Biggest Stakes Murray International Trust's biggest stockholding as of June 30 was British American Tobacco Plc (BATS), which has risen 10 percent this year, while the largest fixed-income investment was in 6.5 percent dollar bonds sold by Rio Tinto maturing in 2018, which currently trade at about $122 for every $100 of face value, up from about $116 at the start of the year. “You don't want to be tempted to be reactionary; you can make mistakes in these markets so you don't want to be involved emotionally,” Stout said. “Switch the screen off because it doesn't make sense, and then switch it back on when the dust has settled and see if there are any big pricing anomalies.” --Bloomberg News--