Interactive Investor

Witan investment trust rings the changes in bid to boost performance

11th August 2020 14:13

Kyle Caldwell from interactive investor


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Around one-third of the portfolio has been tweaked in 2020 to address underperformance. 

Witan investment trust (LSE:WTAN) has moved to address its performance slump after falling 12% behind its benchmark in the first half of 2020.

In its half-yearly numbers, published today, the trust reported a net asset value (NAV) total return of -14.7% for the six-month period to the end of June. In contrast, its composite benchmark, 85% global (FTSE All- World) and 15% UK (FTSE All-Share), returned -2.1%.

The underperformance of the underlying investments held in the portfolio negatively impacted Witan’s share price and discount. Over the period Witan’s share price fell by -19.2%, while the discount widened from 0.7% at the end of 2019 to 5.9% at the end of June.

There was good news, though, for income investors, as Witan signalled its intention to notch up a 46th year of consecutive dividend increases.

In a bid to turn around performance, various changes have been made to the portfolio, which is mostly managed by external fund managers. Among the changes, Witan has terminated its two Europe ex-UK mandates, a global value portfolio and is in the process of selling a UK portfolio.

The proceeds have been invested in global fund managers, with two new US-based managers added that they “are focused on less cyclical and more rapidly growing companies”.

It was noted in the half-yearly numbers that “changes in manager allocations in 2020 have amounted in total to around one-third of the portfolio”.

In June, Andrew Bell, chief executive of Witan investment trust, apologised to shareholders for the poor performance experienced so far this year.

Bell explained that while various factors have led to the underperformance, the trust paid the price for its country weightings. At the start of the year, Witan changed its composite benchmark to adopt a greater global focus but did not move quickly enough to reduce its exposure to the UK and Europe.

Bell acknowledged this by saying in June: “We adopted a new and simpler benchmark from the start of 2020, with a lower UK content (19%, down from 30%) and a higher weighting in the US (46%, up from 25%).

“As a legacy from our previous benchmark, our portfolio was heavily represented in the UK and Europe and under-represented in the US. In view of the reduced political uncertainty in the UK and improving expectations for economic growth outside the US, we decided, wrongly as it turned out, to move only gradually to align our manager allocations to reflect the more global structure of the new benchmark.”

In future, Witan expects to typically have 65% in global portfolios and around 10% in UK mandates. Of the remaining 20% to 25%, up to 10% (as at present) will be invested in special situations in the investment company sector. Witan added that the remaining 10% to 15% will be used for the appointment of newly established managers or managers offering exposure to attractive long-term growth themes requiring a degree of specialisation (for example. information technology, biotechnology, or climate change).

Bell added: “Shareholders could be forgiven for thinking that Witan and its managers had been afflicted with a reverse Midas touch – everything we touch having seemingly turned to lead earlier in the year. The impact is all the greater coming after a strong year in 2019.

“I apologise to our shareholders for the poor performance experienced so far this year. Rest assured that the board and everyone at Witan take the delivery of value for shareholders very seriously and this year’s setback is felt keenly, not least because we are shareholders ourselves.”


These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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