Witan 08 December 2021

Witan offers investors a highly efficient way of getting exposure to global equities, with all the benefits of active management but with few of the disadvantages. The highly diversified portfolio has little key man risk thanks to the multi-manager approach and is different to other global trusts thanks to the in-house executive team, which is fully aligned with Witan’s shareholders.

The portfolio is designed relatively simply and sees the majority of the trust’s assets invested with ‘core’ managers (c. 75%) and the balance using ‘specialist’ teams. Currently, there are eight main underlying managers, as well as other smaller exposures, including a number of investment trusts. Reflecting the long-term investment approach, changing allocations between managers is expected to be infrequent, although as we discuss in Portfolio, October has seen some activity in this regard.

Since the adoption of the current ‘manager of managers’ approach, Witan has outperformed its benchmark and delivered dividend growth well ahead of inflation. The period since the pandemic has presented challenges, but the executive team were quick to address the changed outlook, and the performance has directly benefitted from their actions. The underlying portfolio is currently well balanced, with exposure to companies with enduring cash-flows, higher growth companies, and undervalued, cyclical businesses. This helps explain the decent relative Performance over the last 12 months despite a changeable market environment.

Notwithstanding the pressures felt by many trusts, Witan’s board increased the 2020 Dividend by 1.9%, taking the ten-year compounded growth to 9.6% annualised. We expect to hear confirmation on the dividend for the current financial year in March 2022. Witan currently yields 2.3% on a historic basis.

Witan’s team was wrong-footed by the pandemic, and performance suffered. However, they were quick to confront the new reality, and with changes to the manager roster having been made the resulting portfolio is, in our view, better equipped to deliver for shareholders in this new environment. This demonstrates the advantages Witan has over most other global funds, in that there is little key man risk, and changes to the manager set-up can be made relatively easily. This enables the trust to continue to adapt to a changing investment environment over the coming decades.

As highlighted in Portfolio and ESG, the executive team are already adapting their approach so that investors will benefit from the significant opportunities presented by the shift to a low carbon economy and the world’s net-zero ambitions. Although the bald statistics don’t show it, we continue to believe Witan qualifies as a potential investment for investors who want a responsible, ESG aware manager.

Witan’s discount took a knock from the pandemic, from which it has so far not recovered. Whilst Witan is never likely to be the strongest performer over a short time frame – particularly if a narrow style finds favour over another – over the long-term, outperformance has historically come through. We believe we could see the discount narrow over time, but over the short term, the board continues to protect discount volatility on the downside. As such, Witan is a strong potential candidate for any long-term equity investor.