Alliance Witan lags benchmark, but track record intact

Over its financial year (to 31 December 2024) Alliance Witan Ord (LSE:ALW) returned 13.3% on a net asset value (NAV) basis, with share price total returns slightly higher at 14.3%, aided by a narrowing discount and small positive effects from gearing.

• Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

However, the 19.6% return for the MSCI ACWI benchmark makes relative performance underwhelming. The reasoning behind this ought be familiar to investors by now and is echoed across many global equity managers, which is that Alliance Witan was underexposed to the small set of large-cap companies in the US that dominated market returns (with NVIDIA Corp (NASDAQ:NVDA) called out explicitly) and comprise an ever-more inflated portion of index.

The number in detail (for financial year to 31 December 2024)

Net Asset Value (NAV) Return: +13.3%
Share Price Total Return: +14.3%
Benchmark Return: +19.6%
Discount: -4.7% (vs -5.4% in prior year)
Full-Year Dividend: 26.7p (+6% vs prior year)
Net Gearing: 4.9%

Outlook

The chair and manager’s outlooks balance the “cautious optimism” spurred by healthy global growth and earnings forecasts and initial positivity towards Trump’s policies, with the simultaneous threats of trade tariffs and geopolitical uncertainty.

Discount

The discount began the year at -5.4% and ended the year at -4.7%, with shares being bought back during the period. This discount is shallow when compared both with the wider investment trust universe and the peer group.

Portfolio

Its multi-managerportfolio, which asks external fund managers to pick 20 of their best share ideas, underwent a reasonable amount of change given the inheritance of Witan’s assets. The merger was completed last October, and since then Alliance Witan has entered the FTSE 100 index. Alliance Witan is managed by Willis Towers Watson (WTW).

Many of the managers employed by WTW are not typically well-known managers across retail investors, and rather WTW – thanks to its scale and establishment – has access to overseas and lesser-known managers at competitive rates. While there were some common fund-houses between Alliance and Witan (GQG Partners and Veritas), there were also some mandate changes, including the addition of US-based growth manager, Jennison, and the replacement of Black Creek on account of succession planning with value manager EdgePoint.

• Where pro fund buyers are investing their ISAs in 2025
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

Additionally, the Witan portfolio brought a small number of specialist trusts and private equity funds, investing in life sciences, renewable infrastructure and more, which the manager intends to hold until their valuations improve.

Alliance Witan does not differ too materially from its benchmark from a geographic or sector point of view. The 62% US allocation is around 7% less than its ACWI benchmark, while the 5.4% UK, 13.6% Europe, and 15.6% emerging market allocations are all within a few percentage points of the benchmark allocation.

The difference comes at a stock and style level. While the trust is exposed to some of the “Magnificent Seven”, these positions were less than the benchmark, and were reduced in 2024 in the cases of Alphabet Inc Class A (NASDAQ:GOOGL) and Nvidia (formerly an overweight position versus the benchmark).

Gearing

Net gearing stood at 4.9% as at the end of 2024, with a marginal increase throughout the year to capitalise on the opportunities across equity markets – a decision that provided effective as the leverage added to share price total returns.

Dividend

A final dividend of 6.7p makes for a full-year dividend of 26.7p, an increase of 6% over the prior year and a 58th year of increasing payouts. Importantly, this increases dividends for holders of Alliance Trust and Witan prior to their combination last year.

ii view

The results follow a seemingly successful combination of Alliance Trust and the smaller Witan. Having assimilated £1.5 billion in assets from Witan, the new-founded Alliance Witan (now a FTSE 100 constituent) manages nearly £5.5 billion in total, the third-largest of its peer group behind Scottish Mortgage Ord (LSE:SMT) and closer multi-manager peer F&C Investment Trust Ord (LSE:FCIT).

An immediate benefit apparent for investors is the new fee structure and economies of scale that yielded a reduced yearly fee down to 0.56% (from 0.62% for Alliance Trust holders last year), which can be considered competitive even versus single-manager open-ended peers.

Happily, costs from the transaction were covered by WTW, not borne by shareholders. The new vehicle has impressive scale and, relative to many UK trusts, clearly has decent demand for its shares given its comparatively small discount, which showed some narrowing despite relatively minimal buying back of shares in 2024.

During the period, while absolute returns have been appreciable, they did fall short of the benchmark – a commonality across many actively managed global equity funds in 2024. It also fell short of its close multi-manager peer, F&C, which benefited from its maintained position in Nvidia.

The market environment that prevailed in 2024 was one in which a select number of mega-cap US companies that dominate market-cap weighted indices generated the majority of returns. It is disappointing that underperformance was a product of the underlying managers’ stock selection – given that stock picking is ALW’s mechanism for attempting to deliver outperformance.

However, given that the Magnificent Seven accounted for an astounding 43% of the MSCI ACWI’s gains in the year, if this had not played out then the trust likely would not have been fulfilling its role of offering a diversification both from a stock perspective and across investment styles.

• How and where do ii ISA millionaires invest?
• 18 investment trusts yielding 4.5% or more: key things to consider

For example, while the underweight position in Magnificent Seven accounted for nearly one-third of the trust’s underperformance in 2024, we may now be seeing the early signs that positioning selectively towards these heavily bought companies was prudent as the market environment shifts.

With the exception of Meta Platforms Inc Class A (NASDAQ:META), returns across these companies in 2025 have disappointed even in spite of, in the case of Nvidia for example, impressive revenue, margins and earnings growth that one would expect to merit positive share price reaction.

Alliance Witan aims to provide a diversified stylistic exposure via the underlying managers, from deep value to quality and high growth. Encouragingly, the merit of this approach played out in the period, with stock contribution including some lesser-known names (taser and body-cam maker – Axon Enterprise Inc (NASDAQ:AXON)) and emanating from varied sectors beyond Technology.

While the trust fell short of its benchmark returns over the year, given its balanced stylistic exposure, this is not unexpected. Alliance Witan succeeds in the sense of providing a diversified manner of navigating equity markets via a contrastive set of managers and has succeeded over three, five and 10 years in outperforming its ACWI benchmark.

Alliance Witan is not hugely differentiated in terms of geographic exposure, nor sector exposure, and the preeminent weighting towards the US means that the trust will, of course, be far from immune to a broad sell-off of US equities which, as the market wrangles with the effects of proposed and repealed tariffs at the time of writing, is not inconceivable.

However, investors may appreciate and come to be glad of the diversified stylistic exposure should the prevailing narrowness of equity markets subside and given that it has worked well for WTW over the long term.

Please note that Alliance Witan does not feature as part of ii’s Super 60 or ACE 40 Rated Lists.