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‘Watchful’ Witan beats its active fund managers again

13 March 2018

Global multi-manager investment trust generated 22% return in 2017, with most of its external fund managers doing well, although the direct portfolio managed by Witan executives did best.

Global investment trust Witan (WTAN) continues to give the fund managers it uses to drive shareholder returns a run for their money.

For the second year in a row the portion of the £1.9 billion listed fund directly managed by chief executive Andrew Bell and investment director James Hart outperformed the 10 external fund managers selected by the duo under its ‘multi-manager’ format.

The pair generated a 27.2% total return from investments in investment trusts and closed-end funds in 2017, down from 34.4% in the previous year.

A stake in life sciences fund Syncona (SYNC) did particularly well, soaring 52%; assisted by Aberforth Geared Income, which jumped 36% before restructuring into Aberforth Split Level Income (ASIT) last summer; and Princess Private Equity (PEY), which rose 35%.

The direct portfolio beat the seven investment groups running bespoke mandates for Witan shareholders throughout the year, including Lindsell Train, whose UK investments under star manager Nick Train achieved a 21.8% return; and Matthews which achieved a 21.5% return in Asia.

Last year was a good year for active fund management, said Witan with five of the seven managers beating their stock market benchmarks. Artemis and Heronbridge lagged the FTSE All –Share with their UK stock picks, but have beaten the index since their appointment, it said.

Overall Witan generated a 19% total return on net assets, reflecting the Witan managers’ decision to maintain gearing – or borrowing – at around 10% in order to juice up returns from their portfolios.

As a result it achieved its target of outperforming its benchmark – a composite of the FTSE’s All-Share, North America, Europe and Asia Pacific indices – by more than 2%. The benchmark advanced 15.1%, 3.9% less than Witan.

The investment trust’s shareholders did better than the NAV figure suggests, enjoying a 22.1% total return, including dividends, as the share price continued to re-rate following the dual disturbance in 2016 from the Brexit vote and Aviva’s decision to sell a big stake in the company.

Last month’s declaration of a 6.75p fourth interim dividend brings the total pay-out to shareholders for 2017 to 21p per share, up 10.5% on 2016 and more than double what it paid ten years ago.

This is the 43rd consecutive year Witan has raised dividends, making it one of the ‘dividend heroes’ promoted by its trade body, the Association of Investment Companies.

The dividends were fully covered by revenue earnings with £5.5 million added to revenue reserves, which Witan can dip into when investment income is in short supply.

Bell and Hart were busy last year, reducing their global managers from five to three, appointing emerging market star manager Rajiv Jain – whom it shares with rival Alliance Trust (ATST), and appointing two new European managers.

The changes, made to ensure Witan was not overly diversified and held portfolios of managers’ very best ideas, lifted its ‘active share’, a measure of how different a portfolio is from its index, to 77% from 70%.

Looking ahead, Bell noted the broad but not particularly strong growth in the global economy, which he said should support company profits, although there were risks of rising inflation forcing swift interest rate rises that could hurt both bond and equity markets.

‘Although moderate rises in inflation, interest rates and bond yields can coincide with healthy economic growth and rising equity markets, watchfulness is called for given the degree of investor optimism reflected in equity valuations,’ he said.

Investment company news brought to you by Citywire Financial Publishers Limited.

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