Interactive Investor

Witan underperforms but raises dividend for 47th year in a row

17th March 2022 08:38

Kyle Caldwell from interactive investor

Witan pointed out the latest dividend is more than double the amount paid in 2011 and well ahead of inflation over the period. 

Witan Investment Trust (LSE:WTAN) fell short of its benchmark last year, delivering a net asset value (NAV) total return of 15.8% and a share price total return of 11.9%. The gap between the two return figures was due to its discount widening.

Its benchmark, which is 15% UK (FTSE All Share Index) and 85% Global (FTSE All World Index), returned 19.9%.  

Its dividend rose once again, by 2.8% to 5.6 pence. This marks the 47th consecutive year of dividend increases. Witan pointed out the latest dividend is more than double the amount paid in 2011 and well ahead of inflation over the period.

The trust, which earlier this month became the first closed-ended fund to sign up to the Net Zero Asset Managers initiative, announced in its annual results a commitment that the portfolio will consist entirely of sustainable businesses by 2030 or earlier. 

Commenting on the annual results (which run to 31 December 2021), Andrew Ross, chair of Witan, said the trust was ahead of its benchmark for much of the year, but in the final two months was negatively impacted by the growth sell-off as investors repositioned their portfolios in response to high inflation levels and interest rate rises.

He said: “2021 was a year of considerable progress for markets and it is pleasing to be able to report a 15.8% advance in the company’s NAV total return. However, progress was not smooth, with changing investor reactions to Covid-19 outbreaks, vaccination programmes, struggling global supply chains and rising interest rates causing erratic swings in market leadership.

“These events were reflected in Witan’s performance which showed a strong absolute trend and was ahead of our benchmark until the final furlong. Unfortunately, the last two months saw market leadership move away from the economically sensitive stocks which had served our managers well and a further dramatic shrinkage in the breadth of the performance in the US market.”

The trust, which has most of its portfolio managed by external fund managers, only had one manager that outperformed its respective benchmark last year – GQG – which invests in the emerging markets. 

The weakest performer versus a benchmark was Lindsell Train. Witan noted the more steadily growing mainstream consumer areas favoured by Lindsell Train were out of favour in 2021, with investors instead favouring either fast-growing profitable technology stocks or some of the cyclical sectors.

Witan’s direct holdings, which account for just under 11%, was the best-performing part of the portfolio.  The listed private equity funds, amounting to over half of the direct holdings, delivered strong returns: Electra Private Equity, Apax Global Alpha (LSE:APAX) and Princess Private Equity (LSE:PEY), up 56.7%, 23.9% and 21.6%.

Other highlights were the performances of Schroder Real Estate Investment Trust (LSE:SREI) and BlackRock World Mining Trust (LSE:BRWM), up 45.3% and 17.5%.

On the downside, Syncona (LSE:SYNC) had a disappointing year in share price terms. Witan, however, said it limited the damage as it “significantly pruned the position at elevated prices.”

Commenting on the life science focused trust, which is a member of interactive investor’s ACE 40 list, Andrew Bell, chief executive officer of Witan, said: “2021's weak performance (Syncona) was principally due to a reduction in its premium to net NAV from over 30% at the start of the year to an estimated 6% at the year end.

“The NAV fell by 4% during the year, owing to substantial declines in three holdings listed on the Nasdaq market, where early-stage biotech stocks were out of favour.

“The pandemic had delayed trials of their innovative drug treatments, but a number of results are expected during 2022 which will determine future progress.”  

Bell is continuing to back Syncona. He added: “Despite the price falls in its quoted holdings, which weighed on its overall 2021 NAV performance, we believe Syncona gives Witan access to a differentiated and successful investment area that mainstream managers cannot offer.”

Giving his outlook for global markets, Bell said that 2022 is already looking like a year when a “more selective, value-conscious approach to equities was called for.”

He concluded by pointing out: “The actual and potential ramifications of the Russian military aggression against Ukraine make the immediate outlook less predictable, calling for steady judgement, a long-term approach and a focus on distinguishing substance from mirage in investment terms."

interactive investor view

Tracy Zhao, senior fund analyst at interactive investor, points out that over the past decade Witan has delivered strong outperformance of its benchmark, with its share price total return up 255% versus 210%.

Zhao highlights Witan’s progressive dividend policy as a key attraction for investors. Among interactive investor customers, Witan is the eighth most held investment trust.

She says: “With the cost of living rising fast, an investment trust dividend hero, which continues to increase dividend payments above inflation to date, is reassuring for investors in a time of rampant inflation, with the company now looking to shore up its dividend cover again.

“There are not many multi-manager investment trusts out there and, for those who like the model, this is a good option with a clear ‘best ideas’ strategy. The commitment to sustainability also differentiates it from many of its peers.”

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