Witan continues to actively manage performance

"These two appointments signal a continuation of our move towards investing more with specialist managers who have fundamentally-based and high-conviction approaches towards adding value through stock-picking and portfolio construction," says Mr Bell. "It's quite significant for us because first of all we're aware it's always costly to change managers. You've got all the issues of disinvesting from one portfolio into another one, and we only want to do this if we're pretty sure the new managers are going to add additional value. We only have 11 managers in total, and so for us to change two who represent about 15 per cent of our portfolio is quite a big deal. But we felt that the new managers had more scope to add value for our shareholders in the future."

Mr Bell says that the aim is to keep managers for the long term so that they do not keep incurring costs, and when they do change, they employ a transition manager to do the transaction cost efficiently.

Both the new managers are based in the US.

"We conducted a wide-ranging search of managers with value or deep-value based approaches and these two managers were the product of this selection process," says Mr Bell. "The inputs to the decision to select were wide ranging (including several rounds of interviews and visits to their offices in the US) and reflected the qualities of their investment processes and people as well as track record."

Pzena Investment Management will run around £145m using a global expanded value strategy. This deep value approach involves selecting companies from within what Pzena considers to be the best value fifth of the market and selling them when they rise above the market average valuation. It has a global portfolio of 60 to 90 companies. Mr Bell adds that their approach tends to lead them to "fish" in different parts of the market from other Witan managers.

Read more on deep value investing

Tweedy Browne will manage about £45m using a high dividend strategy. This value investing approach involves the asset manager setting an intrinsic value for companies based on earnings or book value, and buying them on a sufficient discount to that value to give a margin of safety if it is wrong, also ensuring absolute returns over time. It uses cash if it doesn't think there are enough opportunities, and holds about 40 stocks with an emphasis on secure and growing dividend yields. "The quality of this manager's stock research and overall process was very strong," adds Mr Bell. "It has historically outperformed in down markets and has a good very long-term track record."

"We try and choose managers according to their potential to outperform by stock picking, which is more important than whether they're growth, momentum or value investors," explains Mr Bell. "But within that, what type of investor you are will inevitably colour to some extent the circumstances in which you'll do well or do badly, and within our portfolio we had a relatively small exposure to managers with a value bias. But with these two appointments, we've increased that exposure."

We tipped the investment trust as a buy in July because since Mr Bell's appointment there has been a marked improvement in performance (read our tip). The trust has beaten the average for the Global Growth investment trust sector over one, three and five years, as well FTSE World ex UK and its own hybrid benchmark.

Despite this, Witan still trades at a discount to net asset value of 8.25 per cent, albeit tighter than the 10 per cent level when we tipped it, but wider than earlier this year when it has been as tight as 7.53 per cent. Witan has a discount target of 10 per cent which it maintains via share buybacks. It also has a very low ongoing charge for a fund which invests in other funds of 1.01 per cent. Buy.

Source: Morningstar, *Witan.

Source: Morningstar as at 29 November 2013

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