Investment Trust Analyst: Witan’s low cost multi-manager model is proving profitable for shareholders


#1

Originally published at: https://whichinvestmenttrust.com/16732-2/

It’s been increasing its dividend for 43 years, including 10% plus rises in each of the past two years. In fact, overall, Witan’s carefully curated portfolio is doing rather well. Fast Facts Large and liquid global investment trust Multi manager which means it selects the best external managers globally to manage different parts of its…


#2

Fees on Witan are half as much again as F&C, the discount is lower and the five year record is worse.


#3

True, Foreign & Colonial is ahead over 5yrs, Witan ahead over 10. Witan is cheap for a multi-manager though, they’re always expensive. I suppose F&C is kinds of a multi manager except it internal managers mainly, a bit like Bankers.

I dunno, my hunch here is the Witan guys have laid the ground here for a spurt of good performance. They seem to be really choosing their managers carefully. I like their European choices, Crux and SW Mitchell, and the Emerging markets one too.

I don’t own either as it happens @mickbeaman but I am mulling over Witan. I have too much in cash in my SIPP and still to use any of my ISA allowance.

I’ll take a look at F&C too, unless @whichinvest @RichardOwen are planning on doing a write up on F&C?


#4

I think they both have attractive attributes @mickbeaman @jonno. As it happens we have a big feature on F&C coming up as part of our 150th anniversary celebrations of investment trusts. Dice is producing research on F&C, and it’s due mid-march.


#5

The problem with many of the large trusts - and I include both of these in that - is that by offering really good diversification, they tend to diversify away their chance of beating the market through better stock selection over the longer term. Granted they look for other ways to outperform. F&C went for Private Equity among other things and Witan have their Multi-manager approach. But too much private equity can reduce the attraction of the fund (look at Caledonia’s discount) and multi-managers are no guarantee of better performance. I hold Witan Pacific and that has struggled to keep up with the index even over time scales that permit meaningful comparison. So I prefer to focus on buying on (a) low fees and (b) decent discounts. Unlike many of my own bright strategies (such as going short on the USA and long gilts five years ago!) , that one has actually made me money over 30 years!


#6

I have been a long-term holder of Witan and am very pleased with its performance. However, one thing that I noticed in its KID was that ‘other ongoing costs’ are listed at 1.5% per annum!

That is far higher than I recall its fee being disclosed pre-MIFID 2. Morningstar, for example, lists its ongoing charge as 0.69%, leaving me slightly confused.


#7

I think that the high figure is historic and includes a performance fee. The fund sometimes pays performance fees to the sub-managers. A few years ago I phoned to ask them to confirm that their quoted fees include all payments to under-managers. They confirmed that they did but I am still not quite convinced! There are so many costs that can get buried in sub managers expenses!


#8

I know fees have come down over the past few years at Witan @mickbeaman @BillyRayValentine but I thin Mick might be right.

I think the whole fees situation is confusing. Under Mifid I believe they have to include the gearing cost which can push the ongoing charge up to what appears to be an incredible high level, but you can’t compare like with like, especially when it concerns OEICs because
they don’t have gearing. In the round I think gearing is a good thing, especially right now when interest rates are so low.

I really agree with the point they made in the article about the cheap long term gearing benefiting shareholders for a long time to come. It’s a contributory factor to me not only remaining an investor but topping up my holding.


#9

It can be useful to take a look at the Accounts but their last full set only ran to Dec 2106. The results for last year should come out later this month. For me, a key metric is the extent to which their investment income (i.e. from dividends rather than any gain in the value of the holdings i.e. the capital account) pays for the dividend. (Many trusts charge a lot of their expenses to the capital account in order to boost - artificially in my view - the amount available for dividends. To my mind there is a logical argument for treating performance fees this way but not the normal running costs!). In Witan’s case if you adjust the 2016 figures for this or, better still, do the sums based on the cash flow, it would appear that the dividend was not covered by the net investment income less ALL recurring costs.
For what it is worth the 2016 accounts do show £1.46m of performance fees paid, all of which was charged to capital. In 2015 the equivalent figure was around £4.3m.
We shall learn more when this years figures come out!


#10

The key points I take away from this analysis on Witan, which I think, incidentally, is very good , but my key take away is that it is a very actively managed portfolio. and they are long term, as demonstrated by the fixed gearing which will look after the interests of shareholders very well for the next couple of decades, which is long after the current management will be gone.

Well done Witan I say!


#11

I’ve just bitten the bullet and bought a holding in Witan for my ISA and SIPP. There are a lot of good points made here that I’ve really thought over, especially from @mickbeaman @jonno @BillyRayValentine and @citygirl. Thanks for all your constructively argued points.

I’ve bought a holding in the end because I like what the mangers have done with the Witan portfolio over the past year, putting more in to Europe and away from areas that are a little more expensive.

Also I like to hold my investments for five years plus and the fact that they’ve arranged all this cheap debt means as interest rates grow they’ll be protected for decades to come.

I’m not expecting Witan to top the leader board, that would be too risky, but I expect the five-ten year outcome for my investment to thrash what I could have earned from a tracker fund.


#12

I think Witan is a very good global equity IT. Its performance may not be as good as the likes as Scottish Mortgage, but then it doesn’t have the same level of exposure to the tech sector and is a lower risk proposition in comparison.