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Witan Investment Trust - June 2020 fund update

Investment Analyst Jonathon Curtis shares our analysis on the manager, process, culture, cost and performance of Witan Investment Trust.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • Two of the Europe ex-UK portfolios have been removed as the manager prefers the flexibility of global portfolios
  • Investing relatively little in the US and a lot in the UK has hurt recent performance
  • The trust increased its dividend for the 45th consecutive year – not a guarantee of future income

How it fits in a portfolio

This trust aims to grow investors’ capital and income stream over the long term. Its investments cover a variety of investment styles, so the trust could help diversify a portfolio following one particular approach. As a global trust, it could also be a useful addition to portfolios with little invested outside the UK. Portfolios aimed at growing income over time, rather than achieving a high but potentially unreliable yield, might also find this a good option.

Manager

Andrew Bell has been responsible for the overall management of the Witan Investment Trust since 2010. He’s the trust’s CEO too, and a non-executive director of another investment trust. He was also previously chairman and non-executive director of other investment trusts and was Chairman of the Association of Investment Companies – which represents investment trusts in the UK – between 2011 and 2013.

Bell works with James Hart, who’s been Witan’s Investment Director since 2015. Hart’s previously held roles at other companies as a portfolio manager, emerging market specialist and research analyst.

Process

Bell and Hart invest in portfolios run by managers they think can deliver strong long-term growth and income. They look for managers with different investment styles and approaches. They’ll then blend them to create a portfolio that aims to deliver long-term growth in both capital and income.

Until recently, Bell and Hart invested in ten different managers, but in the past few weeks they’ve sold the two Europe ex-UK portfolios run by Crux and SW Mitchell, and a global one run by Pzena. They used some of the proceeds to invest more in the three remaining global portfolios – run by Lansdowne Partners, Lindsell Train and Veritas. The rest was invested in a US tracker fund until a suitable replacement for Pzena can be found.

The changes were made to bring the trust more in line with its benchmark, which is made up of 85% FTSE All World, and 15% FTSE All Share. Bell and Hart invest more in North America than any other region, but don’t currently invest as much as the benchmark. Conversely they currently invest more in the UK than the benchmark. They can also invest in emerging markets and smaller companies, which are both higher risk. A small portion of the trust is invested in other specialist funds, such as those investing in UK commercial property, private equity and life sciences & biotechnology.

Gearing (borrowing to invest) is used, which can amplify returns but also increases losses, so it increases risk. The managers can use derivatives to help them invest, which if used also adds risk. Investors should refer to the latest annual reports and accounts and Key Investor Information for details of the risks and charging structure.

Culture

Witan was founded over a hundred years ago in 1909. It was set up initially to manage the estate of the first Lord Faringdon. From 1934 its investments were managed by Henderson Administration, but in 2004 it became self-managed and changed to its present ‘multi-manager’ strategy.

In February 2020 the trust signed up to the UN Principles for Responsible Investment (UN PRI), which commits large investors to six principles regarding environmental, social and governance (ESG) matters. It uses the services of specialist consultants to monitor ESG issues relating to its investments.

Cost

The trust’s current ongoing charge is 0.91%, which includes the 0.53% annual management charge and a performance fee. This is among the highest in the AIC Global sector, and means the trust has a bigger hurdle to deliver positive returns. We’d also prefer there not to be a performance fee, as this reduces investors’ returns. If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. Investment trusts are free to hold in a Fund & Share Account.

Performance

During the trust’s financial year to 31 December 2019, its net asset value (NAV) rose 21.3%, slightly ahead of the 20.3% gain in the benchmark. The share price rose 22.1% as its discount to NAV narrowed. The trust currently trades on a 6.8% discount. Gearing also helped to improve returns. Remember past performance isn’t a guide to the future.

A 5.35p per share dividend was paid, which is 13.8% higher than the previous 12 month period. This continues the trust’s impressive run of increasing income paid to investors each year for the last 45 years. It currently yields 2.9% although remember yields are variable, not guaranteed, nor a reliable indicator of future income.

The trust’s performance since the start of the year has been poor. It’s fallen 23.1%* compared with a 5% decline in the benchmark. Performance was hurt by the trust’s relatively high exposure to the UK, which was one of the worst performing major markets, and relatively low exposure to the US and technology sector, which were among the strongest. The use of gearing as markets fell also increased losses.

This is a short period of time though. Since Bell began managing the trust in April 2010 it’s been ahead of the benchmark for the majority of his tenure, although because of performance over the past few months it’s fallen slightly behind. As ever, none of this is a reliable indicator of future returns.

Witan Investment Trust performance under Andrew Bell

Past performance is not a guide to the future. Source: Lipper IM *to 31/05/2020

**15% FTSE All Share and 85% FTSE All World

Annual percentage growth
May 15 -
May 16
May 16 -
May 17
May 17 -
May 18
May 18 -
May 19
May 19 -
May 20
Witan Investment Trust -7.4% 37.9% 9.4% -3.2% -12.2%
Benchmark** -1.1% 32.0% 8.6% 3.4% 5.1%

Past performance is not a guide to the future. Source: Lipper IM to 31/05/2020

**15% FTSE All Share and 85% FTSE All World

More on Witan Investment Trust, including charges

Witan Investment Trust Key Investor Information


Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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