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Witan’s lone star shone at Veritas in ‘difficult’ 2018

15 March 2019

Veritas’s Andrew Headley was the one of 10 fund managers picked by Witan to achieve a positive return last year as £1.8 billion global fund underperformed stock market and main rival Alliance Trust.

Veritas’s Andrew Headley was the only one of 10 external fund managers picked by Witan (WTAN) to achieve a positive return last year as the £1.8 billion global investment trust underperformed the stock market and its main rival Alliance Trust (ATST).

Chief executive Andrew Bell said 2018 was ‘a difficult year for active management’ as what had been a good but volatile period up to September turned into a bloodbath as global markets tumbled in the fourth quarter.

As a result Witan reported an 8.4% fall in net asset value, with dividends included, for last year. This compared to a 6.5% decline in its benchmark, a composite index made up of 30% FTSE All-Share, 25% FTSE North America, 20% FTSE Europe ex-UK, 20% FTSE Asia Pacific, 5% emerging markets.

Witan, a self-managed trust that outsources portions of its portfolio to external fund managers, also lagged Alliance Trust, which switched to a similar strategy under Willis Towers Watson in April 2017. Earlier this month it reported a 4.2% fall in NAV, slightly worse than its benchmark’s 3.3% decline.

Despite its difficulties, Witan retains a good long-term track record. Over 10 years it has delivered a total return on net assets of 276%, underpinning a 302% total return to shareholders. The shares trade 2.5% below NAV, slightly wider than their narrow 1.6% average discount of the past 12 months.

And there was better news on the dividend with a 7.75p fourth dividend bringing the total for the year to 23.5p, an increase of 11.9% over the 21p paid in 2017. Excess income of £4.7 million lifts revenue reserves to £65 million with which Witan can smooth future dividends when income falls. 

How Witan managers fared

  Witan assets managed Performance in 2018  
Manager / Sector   Manager return Benchmark return
Artemis / UK £151.4m -13% -9.5%
Heronbridge / UK £124.1m -10.1% -9.5%
Lindsell Train / UK £175.5m 0% -9.5%
Lansdowne Partners £302.9m -5.4% -3.4%
Pzena / Global £276.5m -9% -3.4%
Veritas / Global £294.6m 1.2% -3.4%
Crux / Europe £92.1m -13% -9.5%
SW Mitchell / Europe £85.9m -19.9% -9.5%
Matthews / Asia  £238.3m -5.6% -7.9%
GQG / Emerging Markets £96.5m -8.8% -8.9%
Witan direct £201.8m -1.4% -6.5%

Source: Witan

Headley of Veritas Asset Management was the only Witan manager to scrape in with a barely positive return of 1.2% from his global portfolio of ‘fundamental value’ stocks.

Headley was one of four managers who beat their benchmark, most notably star fund manager Nick Train whose UK portfolio achieved a zero return but one that was 9.5% ahead of the loss in the UK stock market. Train is manager of Finsbury Growth & Income (FGT) and Lindsell Train (LTI) investment trusts and has a Citywire AA-rating for the performance of his open-ended funds.

An Asia income portfolio run by Yu Zhang of Matthews International beat the Pacific Basin stock market by 2.3% but nevertheless fell by 5.6%. Emerging markets star Rajiv Jain of GQG Partners marginally beat his index by 0.1% but lost 8.8%.

The six other fund managers on Witan’s roster underperformed. The worst performance came in Europe where Stuart Mitchell of SW Mitchell Capital delivered a 20% loss, 10.4% more than the Europe’s stock market, and Richard Pease of Crux Asset Management whose portfolio tumbled 13%

Derek Stuart of Artemis saw his UK portfolio underperform his benchmark by 3.5%, while John Goetz of Pzena’s global mandate fell short of the benchmark by 5.6%, in what Bell said was ‘a difficult year for value managers’.

A tenth of Witan’s assets is held in a direct portfolio of shares and funds picked by Bell and investment director James Hart. This too slipped 1.4% but was 5.1% better than its benchmark, helped by the 34% gain in the highly rated life sciences Syncona (SYNC) investment trust.

Manic markets

Bell said markets were prone to ‘over optimism and excessive gloom’ but although he said there was still a dark cloud hanging over markets ‘the prevailing policy worries appear to be improving’ as the price of oil falls, trade dispute talks make progress, and the US Federal Reserve is taking a more dovish approach to interest rate rises.

Fortunately, Brexit is not a huge issue for Witan’s global investments though Bell said the risks for the UK economy were significant and could cloud investor attitudes to the UK.

He said 2019 started on a pessimistic note but despite numerous concerns this year ‘is not a one-way bet’.

‘The risks are more fully recognised and positive surprises seem just as possible as unexpected shocks,’ he said.

Witan adopted its multi-manager approach in 2003 after Harry Henderson became its chairman, a role that he will retire from next year.

Witan has also proposed a five-for-one share split to reduce the size of its stock, which fetches over £10, and make the shares easier to trade.

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


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