Witan ups Europe exposure with new manager appointments

Witan has a multi-manager structure whereby an in-house team chooses an asset allocation and then appoints external managers to implement it.

"The reason for the new appointments is to increase our actively managed exposure to European equities, for which the political and economic backdrop has improved during 2017," said Andrew Bell, chief executive officer of Witan. "We took a more positive view on the region in April, ahead of the French presidential election, using equity index futures to increase our exposure, while we conducted a search among available high-conviction active managers to increase the stock-specific focus of our portfolio and its potential to outperform."

The trust had 21 per cent of its assets in Europe as at the end of September, an increase on the 16 per cent it had in this region at the end of December 2016 and the 17.9 per cent at the end of June 2017.

"As well as increasing Witan's exposure to a region with improving economic fundamentals and many well-managed international companies, this change marks a further step towards increasing the stock-specific conviction in our combined portfolio," added Mr Bell. "One, albeit imperfect, measure of this is active share – the degree to which a portfolio differs from its benchmark, with 0 per cent being a replica of the index and 100 per cent having no holdings in common. The appointment of Crux and SW Mitchell, with concentrated portfolios, will significantly increase the active share of our European manager portfolios from around 70 per cent to 86 per cent, with Witan's overall combined active share rising to over 76 per cent, from around 74 per cent in June." 

>The reason for the new appointments is to increase our actively managed exposure to European equities, for which the political and economic backdrop has improved during 2017," said Andrew Bell

Witan beats FTSE World index in net asset value (NAV) terms over one, three and five years, and the average return for global investment trusts over five, according to Winterflood. And, according to Numis Securities, since Mr Bell became chief executive in 2010, the trust has made NAV total returns of 165 per cent (13.4 per cent  a year) ahead of the MSCI AC World index's (total return in sterling) of 145 per cent (12.3 per cent a year).

Marathon ran 8 per cent of Witan's assets at the end of September. It had been appointed to run a portion of Witan's portfolio in July 2010, and between then and the end of June this year made a return of 11.9 per cent, against 10 per cent for the FTSE All-World Developed Europe index. But Marathon underperformed this benchmark in 2016 with a return of 13.7 per cent against 19.7 per cent.

However, James Hart, investment director at Witan, said the replacement of Marathon was not due to underperformance in 2016 because Witan almost never changes a manager because of past performance alone, although if there were prolonged performance issues, this would raise questions. He said part of the reason for the new managers is because they will invest in continental Europe, rather than Europe including the UK, like Marathon. "We want pure exposure to Europe because we have the UK covered elsewhere," he explained. 

Three managers run dedicated UK portfolios for Witan - Artemis, Lindsell Train and Heronbridge.

"Marathon has been pretty good over the long term, but its outperformance was just shy of 2 per cent, and going forward we are looking for managers who can do more, so want ones that run focused portfolios," said Mr Hart. "Marathon ran a diversified portfolio which is good, for example, for pension fund money and a shorter-term performance objective against a benchmark. But we are looking for concentrated portfolios and outperformance of more than 2 per cent. Marathon has done a very good job over a long period, but is too diverse for our multi-manager structure."

The investment team at CRUX Asset Management includes highly regarded manager Richard Pease, who runs funds including FP CRUX European Special Situations (GB00BTJRQ064), which has a strong performance record.

SW Mitchell Capital runs unconstrained and concentrated portfolios for institutions, and manages assets worth $2bn. It aims to uncover unrecognised value, with a process centred on company meetings.

Source: Winterflood as at 1 November 2017, *Witan

Performance

Source: Winterflood as at 1 November 2017

Top 10 holdings as at 30 September 2017 (%)

Source: Witan

Geographic breakdown (%)

Source: Witan

*Includes funds listed in the UK but invested internationally