Witan 30 December 2022
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.
WTAN has an objective to grow capital and income from global equities. It does so using a differentiated multi-manager approach, combining a range of core managers with a number of specialist managers, which offer exposure to other interesting areas of the market. Uniquely, allocations are set by WTAN’s directly-employed executive team, comprising Andrew Bell and James Hart, and the independent board.
WTAN aims to provide a one-stop shop, with selection and monitoring of underlying managers as well as a directly-invested portfolio of other investment trusts, providing a broadly-diversified portfolio and a high active share, when compared to the benchmark. The highly-diversified portfolio is designed to provide all the benefits of active management but with few of the disadvantages, such as key-man risk.
WTAN is very different to other global trusts or multi-manager products due to the in-house executive team which is aligned fully with WTAN’s shareholders. Allocations are set by WTAN’s directly-employed executive team, comprising Andrew Bell and James Hart, and the independent board. As we discuss in the Portfolio section, the benefits of the in-house executive team can be neatly illustrated by their activity during recent volatility in markets, which has presented plenty of interesting opportunities to take advantage of, for the long term.
WTAN is one of the leading trusts of the AIC’s ‘dividend heroes’, having delivered 47 years of dividend increases. Over the past ten years, dividend growth has averaged 8.8% per annum. At the current share price, WTAN yields 2.6% on a historic basis and the board has indicated that with earnings having substantially improved relative to last year, it expects to see further growth in the dividend.
Whilst WTAN’s long-term performance numbers are good, the trust has, unarguably, struggled in more recent times. This has been largely during very challenging and, we hope, unique periods for equity markets. As we discuss in the Performance section, Q1 2020 and Q1 2022 have had for very different reasons outsized impacts on WTAN’s performance statistics, exacerbated by gearing (see Gearing section). On the other hand, the comparison with the AIC global peer group weighted average may be more indicative, which shows only a very slight degree of underperformance over five years.
In our view, the trust’s underperformance in the recent past does not signify any fundamental issues with Witan’s process or manager line-up. Indeed, the engine which drives long-term performance is a diversified stable of successful and well-established managers (see Portfolio section). As we discuss in the ESG section, the board and executive team are leading the charge towards investing only in what they view to be ‘sustainable’ companies by 2030 or before. Over time, WTAN’s overall exposure will be dynamic and able to adapt to the investment environment as circumstances change.
WTAN’s track record of dividend increases and the extent of its reserves should, in our view, give confidence for the long-term dividend trajectory. On the other hand, WTAN’s discount continues to lag and, at 6.6%, has been supported partially by buybacks. As we discuss in the Discount section, it is possible that, should performance start to improve and confidence returns to markets, the shares could experience a rerating.
- ‘Manager of managers’-approach offers diversified exposure within a clear portfolio structure
- Majority of global managers complemented by specialists means portfolio is likely to be differentiated compared to other global trusts
- A reliable dividend, progressively growing for the past 47 years
- Structurally higher exposure to UK than many global peers means this could influence relative performance
- Poor performance in H1 2020 and H1 2022 means long-term track record has been affected
- Gearing can exacerbate the downside