Witan no longer "nice but dull"

In 2014, the trust achieved a net asset value total return of 6.6 per cent, 1.1 per cent ahead of its benchmark, and increased its dividend by 6.9 per cent, to 15.4p. This was in a year of tougher equity market returns, which Mr Bell says was a "boring year from the view of numbers" but an exciting year for Witan. It moved from a discount to a premium for the first time in more than 40 years, prompting a share issue – the first year since 1996 that the company has had more shares in issue at the end of the year than at the start.

Mr Bell credits Witan's results to the trust's 11 external managers and its strong allocation to the US, UK and Japan. He says: "The US rose 20 per cent in sterling terms, double the 10 per cent US market rise. It also helped that our managers managed to beat the index in the UK."

Mr Bell thinks the UK will be a "dark horse" over the next year due to excessive market pessimism over election uncertainty and the potential for a ratings recovery for oil and mining stocks. "I'm not saying they're going to boom, but there could be a headwind from the big collapse in ratings in those stocks at the end of last year," he says.

Since 2005 Witan has used a team of external managers and taken a stockpicking approach to geographic and sector allocation. Its list of managers includes Artemis, Lansdowne Partners and Matthews. Of the 11 fund managers, seven managed to beat their benchmarks in the last financial year.

The strategy means that investors pay performance fees, taking the total ongoing charge to 0.96 per cent, above the AIC global sector average of 0.81 per cent. However it remains much cheaper than the IA global equity fund sector average of 1.45 per cent and last year's 0.96 per cent was a reduction on the 1.12 per cent it charged in 2013.

"Our managers tend to buy companies that are in sensible franchises, sustainably financed and which aren't too cyclical or too leveraged, rather than trying to punt the latest theme," says Mr Bell. "But the attitudes of managers varies a lot. There are those who are out and out value, such as Tweedy Browne, and those with a value bias such as Matthews and Heronbridge, who have higher-yielding stocks. Then there are others who are more nimble-footed, like Lansdowne, which at the moment has a growth-orientated portfolio but I would never categorise it as growth or value. If the weather changed they'd put on a duffel coat, not a bikini."

Mr Bell is explicit that the fund does not want to drop a year in its rising dividend record and, if necessary, will use its 1.5 times dividend cover to make those payments, giving managers freedom to refrain from buying only high-yielding equities if that is not where they feel value lies.

Over the coming year Mr Bell is sceptical about the US and Europe. In the US he feels the buoyancy of last year means "less hope for a positive surprise". Regarding Europe, he says: "Clearly a much weaker currency is a major benefit, and the QE programme will accelerate the pace at which the banks can recapitalise themselves. But nonetheless there's very elusive consensus about how to manage that balance between the ants and the grasshoppers and I also have a hunch that as soon as you get a whiff of economic recovery the ECB will take away the stimulus."

He is also unenthusiastic about Russia, saying: "Russia is a dish that you want to eat with a very long spoon. It is probably quite a cheap market objectively, but one in which there's lower-than-average confidence in the rule of law and the rule of contract."

After the UK and US, the fund's largest exposure remains to Japan, with 6.3 per cent invested in the region. It is also the only exception to the fund's stockpicking strategy. Mr Bell took the decision to overrule managers in 2013 when he thought Japan looked under-owned. He doubled exposure from 3.5 per cent to 7 per cent via index futures contracts, not exposed to the currency risk of the yen, and an Oeic.

"The futures have worked better than the fund, which was exposed to the yen. We've had a pretty good run from it, but a lot of that has been supported by rising earnings. We think Japan is now getting more fully valued, but at the time it looked like a good case," he says.

Sources: Morningstar, yield figure: fund factsheet, as at January 2015

Top 10 holdings

Source: Morningstar

Geographic breakdown

Source: Morningstar

Fund manager allocation

Source: Witan.com

WTAN performance against the benchmark*

Source: Witan.com

*Composite: the FTSE All-Share index 40%, the FTSE All-World North America Index 20%, the FTSE All-World Europe (ex UK) Index 20% and the FTSE All-World Asia PaciƬc Index 20%.