Witan: the "lame duck" investment trust has become a winner

The global investment trust looked lacklustre early this year, but is making a convincing comeback.

My categorisation of Witan Investment Trust (LSE: WTAN), the £2bn global investment fund, as a “lame duck” at the start of the year brought an immediate response from its lead manager, Andrew Bell. I had written that its investment record, a 4% return over one year and 15% over five, was dismal, it had been too slow in reducing a heavy UK exposure and that the “fund-of-funds” investment model had proved inflexible.

Bell admitted to being “wrongfooted” by the pandemic but explained that they had taken early action, allocating 14% of the trust to two new “quality/growth” managers. He expressed confidence that the reduced but still large UK exposure was starting to work in the trust’s favour and was keen to avoid being whipsawed by making radical changes. The trust had bought back 7% of its shares and he had twice added to his personal holding. Performance in absolute terms and relative to benchmark had been positive for seven consecutive months.

Eclipsing the World index

Since then, performance has been strong so that the 12-month return is now 36%, more than 11% ahead of the MSCI All Countries World index and among the best in the sector. Comparing Witan to Alliance Trust, Iain Scouller of brokers Stifel writes: “While Alliance is still ahead on two-year performance, Witan’s performance has rebounded strongly.” Alliance is managed by the investment consultancy arm of Willis Towers Watson using a similar “multi-manager” approach: it subcontracts investment management to carefully chosen investment managers around the world.

Witan uses Willis Towers Watson’s database to screen for promising managers but no longer takes advice from them. This looks sensible. The departure from Willis Towers Watson last year of David Shapiro, Alliance’s day-to-day manager, has left Alliance’s performance, a 30% gain in the last year, lagging Witan’s. Without Shapiro, it is hard to believe that Willis Towers Watson’s institutional culture is suited to managing a trust with shareholders looking for a bit of flair.

Growth at a reasonable price 

By contrast, the commitment of Bell and his co-manager, James Hart, is indisputable. Their style “is centred on growth at a reasonable price” but the six core managers, accounting for 75% of the portfolio, include the value-orientated Veritas. Five of these managers are global and only one, Artemis, is UK-focused. 23% of the portfolio is in specialist funds, including 11% directly invested in trusts in the areas of private equity (Electra, Apax Global and Princess), property (Schroder Real Estate) and biotech (Syncona). Bell points to the 66% return on Electra shares in the second quarter as evidence of how this adds value.

About 7% is invested in an emerging-markets fund and 4% in the GMO Climate Change Fund. Bell accepts that they were late in buying into this theme but is adding on setbacks. Meanwhile, 2% is in an S&P 500 exchange-traded fund (ETF) to raise US exposure to 38% of the portfolio, excluding the investment trusts. And 21% is in the UK, showing that this is through the stockpicking of the underlying managers rather than a top-down allocation. Witan’s managers clearly deem UK equities undervalued.  

Holdings are reviewed quarterly: “There is a danger in getting too much information but it’s useful to keep an eye on what the managers are doing,” says Hart. Borrowings finance nearly 10% of the portfolio, reflecting an optimistic view of long-term potential. The shares trade at an 8% discount to net asset value (NAV) and yield 2.3%. This sounds underwhelming but the dividend has been increased every year for 46 years.

Witan’s revival looks set to continue. It should deliver steady, benchmark-beating low-risk performance with rising income. Most importantly, it has shown an ability to resolve performance issues promptly.

Recommended

Share tips of the week – 2 December
Share tips

Share tips of the week – 2 December

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
2 Dec 2022
Is it cheaper to leave the heating on low all day?
Personal finance

Is it cheaper to leave the heating on low all day?

The weather is getting colder and energy bills are rising, but is it really cheaper to leave the heating on low all day or should you only turn it on …
1 Dec 2022
The best offers for switching banks – get up to £200 free cash
Personal finance

The best offers for switching banks – get up to £200 free cash

Looking to move bank accounts? You can now bag as much as £200 for switching current accounts from two major banks
1 Dec 2022
UK stock market opening times: when will the stock market close for Christmas?
Stockmarkets

UK stock market opening times: when will the stock market close for Christmas?

Here is everything you need to know about UK stock market opening times during the Christmas period of 2022.
1 Dec 2022

Most Popular

Fan heater vs oil heater – which is cheaper?
Personal finance

Fan heater vs oil heater – which is cheaper?

Sales of portable heaters have soared, as households look to cut their energy costs. But which is better: a fan heater or an oil heater? We put them t…
21 Nov 2022
Best regular savings accounts – December 2022
Savings

Best regular savings accounts – December 2022

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
1 Dec 2022
2 investment trusts with growing dividends: which one should you invest in?
Investment trusts

2 investment trusts with growing dividends: which one should you invest in?

They might not have spectacular yields but these two trusts have increased their dividend every year for 55 years.
24 Nov 2022