Shares in Witan Pacific leap nearly 5% after £190 million investment trust offers shareholders a full cash exit in two years’ time if performance does not improve.
Shares in Witan Pacific (WCP) jumped nearly 5% today after the £190 million investment trust said it would offer shareholders a full cash exit in two years’ time if its performance did not improve.
The £190 million fund is unique among London-listed investment companies for investing on a pan-Asia basis including Japan. Like Witan (WTAN), its bigger global sister fund, Witan Pacific takes a multi-manager approach, handing out parcels of its portfolio to four external fund managers: Aberdeen Standard, Dalton, Matthews Asia and Robeco.
Despite the unique proposition, investor demand has been weak with the shares trading at a discount of over 14% below net asset value (NAV) before today’s announcement.
That reflects a decline in relative performance against its benchmark, the MSCI AC Asia Pacific index. While over 10 years Witan Pacific has beaten the index 170% total return with NAV growth of 181% and a total shareholder return of 198%, over three and five years it lags the benchmark with total shareholder returns of 47.5% and 57.9%, underperforming the index returns of 52.4% and 66.1%, according to Numis Securities data.
This also compares poorly to the average 86.2% total return to shareholders in Asia Pacific trusts that don’t invest in Japan.
With pressure from low-cost index tracking funds increasing, the board of Witan Pacific has decided that ‘the company must justify its actively managed investment approach’ with superior returns to the index.
It announced that ‘if the company does not deliver NAV total return outperformance of its benchmark over the period from the last financial year end to 31 January 2020, the board will put forward proposals which would include a full cash exit at close to NAV for all shareholders as soon as reasonably practicable after 31 January 2021.’
That prospect immediately narrowed the discount with the shares jumping 14p or 4.6% to 320.2p.
This piles the pressure on Witan chief executive Andrew Bell and investment director James Hart who oversee the external managers on both trusts.
However, it is a boost for Janus Henderson, which owns nearly 15% of the shares, and discount-hunting value investors such as Wells Capital Management, 1607 Capital Partners and Lazard Asset Management which own nearly 23%, according to Refinitiv Eikon.