UK investors looking for a single fund giving them access to different geographies, sectors and styles within equity investing are spoilt for choice in the listed investment-trust sector. There are 21 funds that are classified as diversified closed-ended global equity funds, according to broker Numis, including famous names such as Scottish Mortgage. However, two of them stand out for a particular style of management: Alliance Trust (LSE: ATST) and Witan (LSE: WTAN).
These funds invest in a wide variety of listed equities from the developed and developing world. Both are happy to move back and forth between value and growth styles of investing. Both have an avowed dividend income policy, with Alliance Trust’s yield running at 1.6% and Witan’s slightly higher at 2.3%. And both are multi-manager funds, choosing active managers from around the world rather than having a portfolio run by a single in-house manager.
Alliance Trust seems to be positioned towards a value-based strategy, albeit towards the quality end of the value spectrum. Over the last few years Witan has shifted its portfolio away from a value bias to a more growth and quality outlook. Nearly 60% of Alliance Trust’s portfolio is made up of North American equities, compared with 38% of Witan’s. Alliance Trust is more heavily exposed to large-cap tech: the IT and communication services sectors comprise over 40% of its portfolio compared with under 25% for Witan.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Witan’s UK equities exposure is currently running at 20%, compared with just over 10% at Alliance Trust. It also invests in London-listed private-equity funds, which are likely to have a higher-than-average UK exposure in their underlying portfolios, as well as specialist vehicles such as life-sciences investor Syncona.
Both trusts are much more exposed to European (excluding UK) stocks than the MSCI AC World index (ACWI), a composite of both developed world and emerging market stocks that both use as a benchmark. The MSCI ACWI has 12% in European stocks, while Alliance Trust is at 14.4% and Witan at 17%.
Profits during the pandemic
Since the low point of the pandemic crash on 23 March 2020, Alliance Trust is up 92.7% and Witan up 83%. You can track the MSCI ACWI directly using an index fund such as the SPDR MSCI ACWI UCITS ETF and it is up by 72% over that same period, so on that basis both funds have performed well. However, the ETF has beaten both trusts over the last two years, returning 32%, compared with 23.8% and 10.4% for Alliance and Witan respectively. Those numbers slightly flatter the ETF because it is an accumulating fund (it reinvests dividends rather than paying them out), but not enough to close the gap.
Similarly, the ETF wins over three and five years. That record might suggest it’s not worth paying the higher costs of active management (ongoing charges of 0.64% for ATST and 0.82% for Witan, versus 0.4% for the ETF). However, many would argue that over the last five-to-ten years returns from global-equity ETFs have been flattered by a liquidity-fuelled momentum market where most large-cap stocks have risen as one. If that environment changes, having active fund managers might be a better strategy.
On strict performance terms over most periods, Alliance Trust has outperformed Witan. But the funds are subtly different. Witan pays a higher dividend and has a more idiosyncratic UK and closed-end fund exposure. It also has a direct focus on green themes through a holding in the GMO Climate Change Fund. Alliance Trust is much more exposed to North America (although still less than the benchmark ACWI) and is well positioned if there’s a rebound in quality-value stock
David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire.
He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com
David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space.
Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business.
David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust.
In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.
Who is the richest person in the world?
The top five richest people in the world have a combined net worth of $825 billion. Who takes the crown for the richest person in the world?
By Vaishali Varu Published
Top 10 stocks with highest growth over past decade - from Nvidia, Microsoft to Netflix, which companies made you the most money?
We reveal the 10 global companies with the biggest returns since 2013. One firm has posted an astonishing 9,870% return, meaning a £1,000 investment would now be worth almost £82,000.
By Ruth Emery Published