Witan Investment Trust (WTAN) didn't used to be a stand out performer but since the appointment of a new chief executive, Andrew Bell, in 2010 there has been a marked change. Over one year it is one of the leading global growth trusts in terms of its returns, and it is well ahead of the average Global Growth investment trust in terms of its share price over three and five years.
- Marked improvement in performance
- Reasonable charges
- Progressive dividend policy
- Diversified portfolio and managers
- May not maintain top performance
It also beats the FTSE World index over these periods, and according to Witan, its own hybrid benchmark which is 40% FTSE All Share, 20% FTSE All World (AW) Europe ex UK, 20% FTSE AW Asia Pacific and 20% FTSE AW North America.
However the trust can still be picked up on a discount to net asset value (NAV) of around 9 per cent, not much tighter than its 12 month average of 10.5 per cent.
This has prompted brokers including Winterflood to change their stance on the trust, which has added Witan to its list of recommendations.
"Since Mr Bell assumed responsibility for Witan NAV is up 53 per cent compared with 47 per cent for its benchmark, and so far in 2013, the NAV is up 24 per cent on a total return basis compared with 15 per cent for its hybrid benchmark (as of 8 July)," says Winterflood. "Despite the changes to the portfolio and improvement in performance, the fund's discount remains near to 10 per cent - its target level - which is protected by buybacks. This presents an opportunity and we foresee Witan being rerated if it sustains its surge in performance. The portfolio is now well placed to generate alpha and, given its size and relatively low expenses including performance fees to external managers, that is an attractive prospect. Furthermore, the fund is currently yielding 2.1 per cent and there is a policy of actively growing the dividend."
IC TIP RATING | |
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Tip style: | GROWTH |
Risk rating: | MEDIUM |
Timescale: | LONG TERM |
The trust has also recently moved to paying quarterly dividends.
Some of the main changes Mr Bell implemented since being in charge have been ending investment in index trackers and changing some of the active managers. Witan does not buy shares itself, it delegates this to a number of external managers, known as a multi-manager approach. Most recently, Heronbridge Investment Management was appointed to run UK money in place of NewSmith Asset Management, and in February Matthews was appointed to an Asia with Japan mandate with emphasis on dividend growth, replacing Comgest which focused on Asia ex-Japan.
"The 11 external managers are now very strong and this has coincided with a pick-up in performance," adds Winterflood.
Read more on the changes implemented by Mr Bell
The trust may also attract greater numbers of investors following the retail distribution review (RDR) which prevents advisers from taking commission, forcing them to consider investments such as investment trusts which don't pay it. These are likely to be large, well-managed and low-cost generalist investment trusts with mainstream equity exposure, such as Witan, according to Nick Sketch, senior investment director, Investec Wealth & Investment. This is because they are particularly suitable for smaller investors who would previously have been steered towards open-ended funds.
Read more on whether regulation boost investment trusts
And although Witan is a fund of funds rather than directly investing in assets it still has a very reasonable ongoing charge of 1.07 per cent.
Winterflood says that due to the multi-manager approach Witan is unlikely to be the best performing global fund for an extended period of time. But with performance much improved and cheap access to range of mangers and a globally diversified portfolio, it could be worth getting into Witan while still at this discount level. BUY.
WITAN INVESTMENT TRUST (WTAN) | |||
PRICE | 630p | GEARING | 110% |
AIC SECTOR | Global Growth | NAV | 694.2p |
FUND TYPE | Investment trust | PRICE DISCOUNT TO NAV | 9.07% |
MARKET CAP | £1.2bn | ONGOING CHARGE | 1.07%* |
SET UP DATE | 1909 | MORE DETAILS | www.witan.com |
YIELD | 2.10% |
Source: Morningstar, *AIC
1 year cumulative share price total return (%) | 3 year cumulative share price total return (%) | 5 year cumulative share price total return (%) | |
Witan | 36.56 | 47.08 | 71.53 |
Global Growth | 21.75 | 36.20 | 50.43 |
FTSE World TR GBP | 29.62 | 44.63 | 65.18 |
MSCI World GR GBP | 31.18 | 48.44 | 66.53 |
Morningstar as at 25 July 2013
TOP TEN HOLDINGS as at 30 June 2013
Diageo | 2 |
London Stock Exchange | 1.7 |
Reed Elsevier | 1.6 |
Electra Private Equity | 1.6 |
Unilever | 1.6 |
Daily Mail & General | 1.3 |
Polar Capital Japan Fund | 1.3 |
BP | 1.3 |
Aberforth Geared Income | 1.2 |
Princess Private Equity | 1.2 |
Geographic Breakdown
UK | 41.5 |
North America | 23 |
Europe | 14.4 |
Far East | 11.2 |
Japan | 7.3 |
Cash | -0.3 |
Other | 2.9 |