Disclosure – Non-Independent Marketing Communication. This is a non-independent marketing communication commissioned by Witan. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
 

WTAN’s differentiated approach remains attractive despite short term performance challenges…by William Heathcoat Amory

 

 

Overview

 

Witan employs a differentiated multi-manager approach to investing with an objective to grow capital and income from global equities. The highly-diversified Portfolio is designed to provide all the benefits of active management but with few of the disadvantages, such as key man risk.

Witan aims to provide a ‘one-stop shop’, with selection and monitoring of underlying managers as well as a directly-invested portfolio of other investment trusts providing a broadly diversified portfolio and a high active share when compared to the benchmark. Witan is very different to other global trusts or multi-manager products due to the in-house executive team which is aligned fully with Witan’s shareholders.

Currently, the manager roster includes eight delegated managers running segregated accounts with full visibility given to Witan’s executive team on every investment. Although there is expected to be a low level of turnover of managers, the executive team has been active recently in allocating capital between them. Managers are selected to provide a range of different approaches and styles, ensuring that the portfolio as a whole is never overly exposed to one sector, style or theme. Re-allocation activity, which can be contrarian, looks to capture a portfolio’s underappreciated growth prospects by balancing that potential for growth with an attractive valuation.

Since the adoption of the current ‘manager of managers’ approach, Witan has outperformed its benchmark and delivered dividend growth well ahead of inflation. The period since the pandemic has presented challenges in a very changeable market environment and short-term performance has suffered.

Witan is one of the leading trusts of the AIC’s ‘dividend heroes’, having delivered 47 years of dividend increases. Over the past 10 years, dividend growth has averaged 8.8% per annum. At the current share price, Witan yields 2.5% on a historic basis.
 

 

Analyst’s View

Witan offers a differentiated approach to multi-manager investing. As we discuss in the ESG section, the board and executive team are taking industry-leading steps towards investing only in what they view to be ‘sustainable’ companies, which they hope to achieve by 2030 or before. In this regard and in our view, Witan adds another feather in its cap with its ambition to provide a one-stop shop for global equity investors, especially those who want a responsible ESG-aware manager.

In other ways, outside of ESG, Witan might be considered to have an element of future-proofing: with highly active managers underpinning the strategy, Witan’s overall exposure will be dynamic and able to adapt to the investment environment as circumstances change. In our view, one of the advantages that Witan has when compared to other global trusts is that a manager is only ever a contributor to the track record. Furthermore, it means that it is far easier to rotate the manager roster to keep up with market events and expectations or take in new, emerging opportunities. Over time, we think this should ensure that long-term performance relative to the benchmark is more consistent than peers.

Witan has seen its discount widen recently but not by as much as many peers in the global sector. The current discount of 6.8% has been supported partially by buybacks. Having traded at a premium prior to the Brexit referendum, it is possible that should performance start to improve and confidence return to markets, Witan could experience a re-rating.
 

Bull

  • ‘Manager of managers’ approach offers diversified exposure within a clear portfolio structure
  • Majority of global managers complemented by specialists means portfolio is likely to be differentiated to other global trusts
  • A reliable dividend, progressively growing for the past 47 years
 

Bear

  • Higher exposure to UK than many global peers means this could influence relative performance
  • Poor performance in H1 2020 and so far during 2022 means long term-track record has been affected
  • Gearing can exacerbate the downside

 

See the full research document here >
 
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