Witan – the multi-managed investment trust
Witan Investment Trust (“Witan”) is one of the largest and best known investment trusts in the global growth sector. Unlike its peers, Witan has a differentiated multi-manager investment approach, an approach that is designed to deliver added value for shareholders while smoothing out the volatility associated with a single manager.
Multi-manager strategies are relatively rare in the closed-ended funds world and Witan is the only global equity investment trust that is wholly multi-managed despite the benefits that multi-manager offers investors.
Multi-manager offers an added level of diversification which means that in addition to the diversification of country, sector and stock offered by a conventional global growth investment trust, multi-manager also offers diversification of investment style. For example, if you have all of your money invested with one manager who has a particular style or bias, you are exposed to that trait. An added layer of diversification helps to smooth out the volatility that is normally associated with a single manager. This is based on the principle that not all managers are good in all markets and that not all managers are successful all of the time.
Witan has 11 different managers based around the world who have been selected because of their success at delivering superior long-term investment returns. Each manager has their own particular investment style, and collectively they manage a portfolio containing over 500 different stocks. For the manager of the overall portfolio, multi-manager also gives a higher degree of flexibility because a multi-manager trust can make changes to a mandate or manager more easily if it finds that one particular area is not working. This compares to a single manager trust where it is difficult to make changes and deficiencies in one area are often masked by strengths in another area.
In summary, multi-manager can give greater diversification, it aims to reduce volatility and provides added flexibility. It is therefore not surprising that multi-manager funds are popular in the open-ended sector, but these normally come at a cost, with typical TERs in excess of 2% for an open-ended multi-managed fund. With assets in excess of £1,100m* Witan is able to drive down costs and deliver the added benefits of multi-manager but its TER in 2011 was less than 0.9%* (2010: 1.07%).
Although Witan has an approach that is widely used in the open-ended sector it also takes full advantage of its investment trust structure, by actively utilising its ability to gear and also by building up dividend reserves (we have £40m in reserve which is the equivalent to 1.7 years of total dividend*). Maintaining a dividend reserve helps smooth dividend growth during lean periods for markets. Witan has increased its dividend for each of the past 37 years, and the increase for the past year was 10.1% - more than twice the 4.2% rate of consumer price inflation*. You should remember that although gearing tends to enhance returns in a rising market it will tend to increase losses triggered by a falling market, furthermore please also remember that past performance is not a guide to future performance and the value of an investment and the income from it can fall as well as rise.
Witan is demonstrating that the benefits of multi-manager can be delivered cost effectively while utilising the structural advantages investment trusts have over their open-ended equivalents. With private investors increasingly opting to manage their investment affairs without a financial adviser, multi-manager is a strategy that many investors should find useful.
*Source Witan as at 31/12/2011
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