Fund Spotlight: dividend hero cautious on AI

Alliance Witan is one of the UK’s oldest established investment trusts, with a heritage dating back to 1888. Today, it is positioned as a core global equity strategy, aiming to deliver real returns over the long term through a combination of capital growth and a growing dividend.

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The trust’s appeal has been further enhanced by an increasingly competitive fee structure. From 1 April 2026, the yearly management fee will reduce to 0.46% of market capitalisation, with a further reduction to 0.41% from 1 January 2027. For an active multi-manager global equity strategy, this represents an attractive cost profile relative to its global peers.

The key question for investors, however, is whether they are comfortable accepting periods of relative underperformance in exchange for a disciplined, fundamentally driven long-term investment process.

What does the fund invest in?

To achieve its objective, the company invests in global equities across a wide range of different sectors and industries. Alliance Witan Ord (LSE:ALW)’s most distinctive characteristic is its multi-manager approach, which differentiates it from more traditional global equity strategies.

The trust’s investment manager, Willis Towers Watson (WTW), has appointed 11 external stock pickers, each managing a concentrated sleeve of high-conviction holdings focusing solely on their strongest investment ideas.

GQG Partners, a US-based investment manager runs the largest portion of the portfolio (18%), with the portion other managers control ranging from 6% to 11%. GQG Partners Global Equity is one of our favoured options for global equity exposure.

In September 2025, Brown Advisory and Artisan Partners were appointed as new managers on the strategy replacing ARGA Investment Management and Sustainable Growth Advisors, respectively. Changes to the line-up reflect a change of WTW’s view on the manager’s ability to add value relative to peers.

This structure offers investors the benefit of both high-conviction stock selection, which can enhance the potential for outperformance and manager diversification, which helps mitigate single-manager risk.

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The resulting portfolio consists of 224 equities, with country and sector exposures broadly aligned with the MSCI All Countries World Index benchmark by design. The largest deviations are underweight the US (59.8% versus 67% for the index) and overweight UK (9% versus 3.3% for the index). A notable feature of recent positioning has been its underweight exposure to the US mega-cap technology names that have driven global equity markets, particularly in 2023 and 2024.

In effect, Alliance Witan is making a strategic bet that market leadership broadens beyond the narrow artificial intelligence (AI) trade, rather than following an increasingly concentrated index. This view is supported by the trust’s valuation metrics.

In the most recent annual report, management highlighted that the underlying portfolio companies exhibit a higher return on equity of 16.4% versus 12.2% for the benchmark, while trading on a lower one-year forward price-to-earnings (P/E) multiple of 18.5x compared with 21.3x. This lends support to the board’s argument that portfolio fundamentals remain stronger than recent share price performance might suggest.

The trust’s net gearing stood at 6.3% as at the end of 2025, with a marginal increase throughout the year to capitalise on the opportunities across equity markets.

How has the fund performed?

In 2025, Alliance Witan delivered a 4.7% net asset value (NAV) total return and a 5.4% share price total return, compared with 13.9% for the MSCI ACWI. This represents a material lag versus the benchmark and a second year of falling short of the strong index returns.  

Source: Morningstar Market Returns (GBP) to 31 March 2026. Past performance is not a guide to future performance.

The primary driver has been stock selection, particularly the trust’s underweight exposure to the small number of mega-cap US technology names that have dominated global equity returns. The trust explicitly attributes a significant portion of its recent relative underperformance to being underweight key AI beneficiaries, including NVIDIA Corp (NASDAQ:NVDA), Broadcom Inc (NASDAQ:AVGO) and Alphabet Inc Class A (NASDAQ:GOOGL).

While this has clearly detracted in the short term, the positioning is in line with the trust’s longer-term philosophy. Alliance Witan continues to focus on high-quality businesses trading at more attractive valuations than the index, and the investment case rests on the view that company fundamentals, rather than short-term market momentum, will be the primary driver of returns over time.

Why are we highlighting this fund?

First, the income track record remains impressive. The trust has now delivered 59 consecutive years of dividend increases, extending one of the strongest records in the investment trust sector.

The trust’s closed-ended structure has enabled the use of the revenue reserve to achieve this record. The current portfolio yield of 2.28% remains above its Association of Investment Companies’ peer group average. This consistency reinforces its role as a resilient core holding for long-term investors seeking both capital growth and rising income.

Second, the successful combination of Alliance Trust and the smaller Witan has increased its scale. Having assimilated £1.5 billion in assets from Witan, the new-founded Alliance Witan (now a FTSE 100 constituent) manages over £5.2 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). This brings meaningful benefits in terms of liquidity, market relevance and discount management.

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The discount finished the year at -4.1%, compared with an AIC Global sector average of around -7%. Importantly, the board has remained proactive in supporting the share price through buybacks, repurchasing 17.8 million shares at a cost of £223.6 million during 2025. While a number of peers continue to trade on wider, persistent discounts, Alliance Witan has demonstrated a clear commitment to active discount control.

Alliance Witan remains a high-quality, income resilient global equity trust, albeit one that has required investor patience during a period dominated by AI-led benchmark concentration. For investors who believe market leadership is likely to broaden over time, the trust’s valuation discipline, diversified manager structure and exceptional dividend record continue to make a compelling long-term case.

Note: Alliance Witan Trust does not form part of ii’s Super 60 or ACE 40 rated lists.

The fund’s instrument page can be viewed here.