All bar one of the 11 sub-strategies used by Witan Investment Trust have outperformed their benchmark since the trust awarded them a mandate, according to research by Numis Securities.
Witan’s global multi-manager approach typically sees it use 10 to 15 active managers, with the aim of delivering added value for shareholders while smoothing out volatility.
Unlike some of its peers, the trust discloses the performance of individual managers, allowing investors to gauge how effective it has been at allocating capital – and they are likely to be impressed by what they see.
The only manager that has failed to beat its benchmark since being appointed by Witan is Pzena, which runs half of the trust’s global fundamental value mandate. While it has delivered annualised returns of 11.8 per cent since December 2013, this is less than the 13.2 per cent made by its benchmark.
Witan’s biggest winner in terms of absolute performance is Lansdowne Partners, which has made annualised returns from its global mispriced mega caps mandate of 20.5 per cent since it was appointed by the trust in December 2012. This is compared with 15.5 per cent from its benchmark.
In relative terms, Lindsell Train’s UK intrinsic value strategy has done best, with annualised returns of 16.7 per cent since September 2010 beating the benchmark by an average of 7.1 percentage points per year.
Witan initiated a new position in April, allocating £14m (or 0.7 per cent net assets) to Latitude Investment Management to invest in global equities, which it said was the first move under a new initiative to use newly established or more specialist managers
.
Numis said that it regards Witan as an attractive core holding for investors seeking global equity exposure.
“The fund provides access to a number of leading managers and has a low ongoing charges figure given its multi-manager approach,” it said.
“In addition, Witan now has a proven track record of performance, with NAV [net asset value] total returns of 12.9 per cent per annum since Andrew Bell [pictured.) took charge in early 2010, ahead of the 12.1 per cent per annum from the MSCI AC World.
“It has lagged behind the global equity peer group over the past year, although this is primarily due to the strong performance of Scottish Mortgage, the largest fund in the peer group, which has a very different risk profile.”
Numis added that the board’s long-term objective of creating “sustainable liquidity in Witan’s shares at or near to net asset value” has been positive for shareholders. It repurchased around 200,000 shares (0.1 per cent of share capital) at an average discount of 1.7 per cent (after purchase costs) during the first half of the year. According to data from the AIC, Witan’s shares are currently trading at a discount of 0.97 per cent, compared with 1.74 and 3.16 per cent from its one- and three-year averages.
In the trust’s interim report for the six months to the end of June, chairman Harry Henderson said that “equity markets travelled a long way to go almost nowhere during the first half of 2018”.
“The mood proved changeable, ranging from new year euphoria over US tax cuts and synchronised global growth, concerns about renascent inflation and Fed tightening, growth disappointment, strong earnings, renewed growth optimism, concern about energy prices and, latterly, political worries centred on US trade policy and European cohesion,” he noted.
However, he added that this period of consolidation, which follows two years of strong gains in sterling terms, appears healthy, “provided that the adverse influences do not tip the world into growth disappointment or recession”.
“It allows the rise in corporate earnings to catch up with the optimism already built into valuations, while enabling investors to assess the risks posed by rising oil prices, the threat of trade tariffs and the gradual rise in global interest rates,” he continued.
Looking forward, Henderson said the mid-year economic backdrop shows relatively strong growth in the US and moderate growth elsewhere, with inflation higher than a year ago but not rising too quickly. He noted that in isolation, these are positive conditions for global equities.
“Equities remain relatively lowly valued compared with bonds and absolute valuations have moderated due to the rise in corporate earnings in 2018,” he continued.
“If the reason for rising rates is that the world economy is moving out of the convalescent ward towards greater health, higher rates are more reassuring than otherwise.
“The main proviso is the avoidance of recession, whether caused by rates rising too high due to central bank misjudgement or because of a trade war initiated by the US.”
He added: “We are attentive to, but do not exaggerate the importance of, the various political risks. We remain focused on active stock-selection and a prudent but opportunistic attitude to risk in order to add value for Witan's shareholders.”
Witan Investment Trust has made a 184.09 per cent return since Bell took charge, compared with 161.64 per cent from the IT Global sector and 73 per cent from its benchmark, split between the FTSE All Share, FTSE All World North America, FTSE All World Asia Pacific, FTSE All World Europe ex UK and FTSE All World Emerging Markets indices.
Performance of trust vs sector and indices over manager tenure
Source: FE Analytics
Witan has increased its dividend for each of the past 43 years. It is currently yielding 1.99 per cent.
The trust has ongoing charges of 0.83 per cent and is 12 per cent geared.