It has been little more than 12 months since Andrew Bell took over as Chief Executive Officer of Witan Investment Trust PLC ("Witan"), the multi-managed investment trust, and in that time over a third of the Trust's portfolio has moved to new investment managers to reflect a shift to a more active investment policy.
Witan has also adopted a number of new tools to control its overall asset allocation and gearing. The pace of change has been swift.
First off in July, Marathon had its mandate broadened from UK to pan-Europe. This was followed in September by the appointment of two UK active managers, Lindsell Train and NewSmith, to manage the 16% of the Trust's assets that had previously been invested in a UK passive vehicle. In November Veritas was appointed to manage a global unconstrained portfolio, replacing the Japan-only mandate previously managed by Brandes and the US enhanced index portfolio previously managed by Henderson Global Investors. And finally, rounding off the year in December, Trilogy was appointed to manage a specialist Emerging Markets portfolio.
This is an evolution of Witan's previous multi-manager approach, explains Andrew. "The guiding principles behind these manager changes were a reorientation of the portfolio towards a full commitment to active managers, closing the remainder of the index-oriented mandates and a greater emphasis on unconstrained cross-border stock selection, reducing the proportion in single-country portfolios."
On top of the changes made to the manager line-up, other levers to manage the portfolio have also been enhanced. In June 2010, Witan began to employ equity index futures. According to Andrew Bell: "The use of equity index futures has a number of benefits. It enables Witan to increase or reduce its gearing at a known and immediate index level, conferring tactical flexibility. It also provides a means of adjusting the geographical asset allocation (for example, by allocating the investment differentially to favoured markets). In both cases we are able to make adjustments without interfering with the assigned objectives for our investment managers, which are to pick stocks that will grow in value over the medium to long term and outperform their respective benchmarks."
Gearing has also been more actively managed, averaging 6.6% in the first half of 2010 before being stepped up to reflect clearer economic prospects in the second half of the year, when gearing averaged 9.9%, ending the year at 5.4%.
Although it is still early days, some of the portfolio modifications have already started to have an impact on the Trust's performance. In 2010 all of Witan's managers who had been in place for the entire year outperformed their respective benchmarks*. In addition, five out of the six which were replaced had outperformed their benchmarks. This combined performance, along with the timely use of gearing, helped to generate a NAV total return of 18.9% - 3.4% ahead of the Witan benchmark which returned 15.5%. The Trust also announced an increase in the dividend of 3.8%. This is the 36th consecutive year that Witan has raised its dividend*.
Witan is unique amongst investment trusts in operating a fully-fledged multi-manager structure for the management of its assets. The changes introduced in 2010 have shifted the Trust's structure towards a more active, high conviction style, and in so doing have improved the potential for outperformance. Andrew is pleased with the way things are moving, "The good results for 2010 reflect both previous decisions and the impact of change made during the year. Our goal now is to extend this increased gradient of outperformance over the longer term*."
This article is issued and approved by Witan Investment Services Limited. Witan Investment Services Limited is registered in England no. 5272533 of 14 Queen Anne's Gate, London, SW1H 9AA. The VAT registration number for Witan Investment Services Limited is 863 5738 89. Witan Investment Services Limited provides investment products and services and is authorised and regulated by the Financial Services Authority. We may record telephone calls for our mutual protection and to improve customer service.
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