Witan reported net asset value (NAV) up 29.4 per cent for the year, with share price returns pushed up to 36.05 per cent by a narrowing discount.
Ewan Lovett-Turner, analyst at Numis Securities, says that the results underline the progress made over the past four years under a new manager, and could lead to a narrowing discount.
“The fund currently trades at a 7.2 per cent discount, which is protected at 10 per cent by buybacks,” he said.
“As a result, Witan remains one of our favoured Global Growth funds.”
The trust, which has a fund of funds structure, was taken over by Andrew Bell in April 2010, and has outperformed its peers since then, with most of the outperformance coming last year.
According to our data, the fund has returned 50.78 per cent in share price terms against an average of 41.78 per cent for the Global Growth sector.
Performance of trust vs sector and benchmark since Apr 2010
Source: FE Analytics
This has been helped by a discount coming in from 12 per cent when Bell arrived, to its current 7.2 per cent.
Analysts at Numis and Cantor both say that the trust could well follow the path of Bankers, a trust of a similar size and mandate, which has jumped onto a premium in recent months.
Price and NAV of trust over 3yrs
Source: FE Analytics
Many of the large and liquid trusts have re-rated onto premiums thanks to growing demand post-RDR, and the analysts suggest the £1.25bn Witan trust could follow the same path once its improved performance is fully recognised by the markets.
Witan allocates its funds between 12 external managers and a 6.3 per cent portion managed directly by Bell. The manager uses this to buy alternatives and investments which the external managers cannot gain access to.
Recently it has been allocated largely to private equity funds, but Bell has taken profits and reduced this segment from over 9 per cent.
When Bell took over, the trust allocated money to trackers, but he switched these for active funds.
“If you pick 10 managers you would like to run all your portfolio, the danger is you end up with something more boring,” Bell said.
“You have to choose racier managers at an individual level to end up with the blend you want. If you don’t start with spices, you can’t end up with a very interesting recipe.”
“If the individual managers each have 50 stocks, it means you end up being an index fund.”
The best performer in Witan’s portfolio during the year was the 8.8 per cent of the trust run by Lansdowne Partners, which appreciated by 48.8 per cent.
Lansdowne is better known for running hedge funds.
Its long/short Lansdowne Developed Markets fund was launched in 2001, and has an excellent track record, making good money in 2007 and 2008 when markets fell and more than doubling the returns of the FTSE All Share over its life.
Performance of fund vs index since Jan 2002
Source: FE Analytics
Bell added Lansdowne to the portfolio in late 2012, although he admits that its current remit is very different from the style it made its name with.
“They give a strong impression of having an adaptable style, but that’s something we will have to keep an eye on,” he said.
Matthews was added last February to run an Asian allocation.
“We selected them as stock-pickers and because they have the ability to buy Japan,” Bell said. “We wanted to be able to take advantage if something happened in the politics.”
“The earnings and economic numbers consistently improved over the last six months or so. If it falls we have an opportunity to outperform by having 1.5 per cent in the market.”
Matthews runs 9 per cent of Witan’s assets and has returned 1 per cent in a period in which its benchmark lost 2 per cent.
Bell is sticking with his exposure to emerging market- and Asia-focused funds despite such sluggish performance.
“We have a structural tilt to be overweight emerging markets and underweight Europe,” he said.
“Europe might have a cyclical recovery, but making the system work could mean Europe enjoys the economic performance of Japan for the next few years and if that happens there will be more market turmoil.”
Although the manager says it feels too early for an emerging markets rebound, he warns that investors usually don’t realise what is happening until it is upon them.
“I remember everybody was bullish in 2011 when they were on a premium, and now they’re on a discount everybody is bearish,” he said.
Matthews runs a number of retail open-ended funds including the £462m Matthews Asia Dividend fund, which has made 16.62 per cent over three years while the index has made just 6.53 per cent.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
Other notable contributors included Lindsell Train, whose 12.1 per cent segment made 38.9 per cent, and Artemis, whose 10.1 per cent segment made 35.7 per cent. Witan’s direct holdings made 31 per cent in the year.
The trust yields 2.2 per cent and has a strong record of increasing its dividend, having done so for 39 consecutive years.
The payout was increased by 9.1 per cent during a year in which CPI rate of inflation was 2 per cent. Ongoing charges were 0.69 per cent before the application of a performance fee, and 1.12 per cent in total.