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Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Witan. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

Witan (WTN) offers investors an actively managed, but diversified, exposure to global equities. Using a manager-of-managers approach, WTN invests in a range of concentrated portfolios, each of which is managed by a third-party manager employed by the board. This approach means that shareholders benefit from diversification and active management, with little key-man or manager risk.

The roster of eight to 12 managers is overseen by Witan’s executive team. Each of the underlying managers has their own investment style, with some being highly adaptable, meaning that the overall portfolio can adapt to changing economic conditions. The executive team can also make significant changes to the portfolio themselves by hiring and firing managers – which is much more easily done than if a trust only has one manager.

2020 has seen an unusual level of activity in this regard, as we discuss under the Portfolio section. These changes reflected a belief by Witan that growth (rather than value) and global (rather than regional) specialists are likely to deliver the best returns going forward. The result is a portfolio which contains a mix of companies with sustainable cash-flows, higher growth companies and high-quality cyclical businesses.

The last of these changes was effective on 01/09/2020. However, WTN has been performing well since equity markets stabilized, and Witan has now outperformed the benchmark for six consecutive months, clawing back a good proportion of the underperformance earlier in the year.

Witan currently yields 2.7%, and has increased its dividend every consecutive year for 45 years. Revenues in 2020 are likely to be around half of the 2019 level, but the board expects to use reserves to support continued dividend growth in 2020.

Analyst's View

2020 was a curve-ball that has seen many trusts struggle. In the case of Witan, underperformance was very much concentrated in Q1. Witan employs structural gearing, historically at around 10% of NAV, which contributed to this underperformance. With gearing now at 12%, and the trust having outperformed the benchmark for six consecutive months (to 30/11/2020), we think Witan is very much back in business.

The executive team were quick to make changes to the portfolio and, with the inclusion of the new management teams, WTN is now decidedly more global and ‘growthy’ than it was in the past. That said, the portfolio retains elements of cyclicality. We think the current portfolio is well set up for the current environment – with manager stock selection resulting in an underweight to the US and overweight to the UK and Asia relative to the benchmark.

Witan’s discount widened out during early 2020, but it has lagged the recovery elsewhere that has seen discounts move back to historically narrow levels. The shares currently trade at a 7.6% discount, and the board continues to repurchase shares. In our view, with the improved performance over the past six months and the re-jigged portfolio showing promise, there is clear potential for the discount to narrow in again.

In the current uncertain outlook for dividend income, the board’s statement on Witan’s dividend is reassuring. At 2.7%, based on last year’s dividend level, it may prove attractive relative to many other income stocks.

BULL BEAR
Manager of managers approach offers diversified array of concentrated portfolios
UK overweight may lead trust to underperform global peers if UK experiences a no-deal Brexit
Refreshed roster of managers, with an increasingly global approach
Poor performance in 2020 leaves performance behind the benchmark YTD
A reliable dividend, progressively growing for the past 45 years
Gearing can exacerbate the downside
Continue to Portfolio

Fund History

24 Apr 2024 Fund Analysis
Business as usual for WTAN’s executive team, while the board reviews investment management arrangements…
17 Apr 2024 Pretty, pretty, pretty good
Do investment trusts really protect capital and income against inflation? Let's take a look…
12 Apr 2024 Inflationary trends
A higher US CPI print is indicative of lurking inflationary trends...
19 Jul 2023 Fund Analysis
2023 has, so far, seen a return to outperformance, but the discount remains wide by historical standards…
12 Jul 2023 Many hands make light work
We break down how multi-managers have performed over the past five years and their positioning for the inevitable uncertainty that lies ahead…
30 Dec 2022 Fund Analysis
Short-term challenges do nothing to dim the long-term prospects for Witan…
17 Aug 2022 The world for sale
While investment trusts are lagging their open-ended cousins in the global sector, their discounts may provide an attractive entry point...
03 Aug 2022 Fund Analysis
WTAN’s differentiated approach remains attractive despite short term performance challenges…
30 Mar 2022 You say tomato…
Do it yourself or put it into a global fund and leave it to the experts - our analyst debate the merits of each approach...
08 Dec 2021 Fund Analysis
Witan continues to adapt to a changing investment environment...
19 Aug 2021 Pandemic immunity
We ask which global equity trusts have outperformed through the different stages of the pandemic…
16 Jun 2021 A better class of travel*
Sharing many features of a traditional family office, investment trusts offer ordinary investors a cost-effective solution to managing family wealth...
09 Jun 2021 Fund Analysis
A solid period of outperformance means WTAN is back in business...
16 Dec 2020 Fund Analysis
Witan has bounced back from Q1 2020, making the 7.6% discount potentially attractive…
07 Sep 2020 Fund Analysis
WTAN has had a challenging 2020, but a refreshed line-up of managers makes the 7.8% discount potentially attractive…
03 Dec 2019 Fund Analysis
Highly active multi-manager approach offering a ‘one-stop shop’ for capital appreciation and income…
15 Apr 2019 Fund Analysis
Witan follows a highly active ‘manager of managers’ approach, using a range of third-party managers to gain exposure to global equity markets...
15 Aug 2018 The income edge
Last year saw investment trusts soar in popularity among both retail investors and wealth managers. We examine why this has happened, as well as the structural advantages of investment trusts for income-hungry investors...
25 Jul 2018 Fund Analysis
This well known global generalist has had a tough run in recent months but a higher active share could prove interesting...
13 Mar 2018 Fund Analysis
Witan is one of the UK’s largest investment trusts and aims for capital growth and an income which rises faster than inflation using a multi-manager approach...
14 Dec 2017 Race to the bottom
How are investment trust boards doing, in bringing down their costs?
16 Aug 2017 Fund Analysis
A global equity trust run via a manager of managers approach that has delivered consistent outperformance over the medium term...
View all

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