‘The days of 15pc growth in UK stocks are over’

Recent stock market dips are a mere blip for a fund that has been running money for more than 100 years. The £1.1bn Witan investment trust was established in 1909 and has delivered 42 consecutive years of rising dividends.

The chief executive, Andrew Bell, explains why he is excited about Europe, why private equity has paid off and why he doesn’t just want cheap managers.

We allocate assets to underlying fund managers rather than run the money ourselves. There are three upsides: we can play to managers’ strengths; because we have 10 or 20 managers it is not as wrenching to change a manager and we are more likely to consider doing so; and we hope that the peaks and troughs of manager performance do not coincide, to smooth out performance.

We also directly invest up to 10pc of the portfolio ourselves, where we think there are opportunities that our managers would not buy. We tend to buy other collective funds, rather than stocks. This allocation has varied between 5pc and 13pc of the portfolio – at the moment it is 9pc. It returned around 27pc last year, compared with the benchmark’s 15pc.

Witan’s Andrew Bell tells Laura Suter where he expects to find the strongest performance this year

Last year we appointed an emerging market manager, GQG, having used “tracker” funds for a while. We also went from five global managers to three, as we felt that we had some overlap between them.

We had been looking at Europe for a while, as we had been under-allocated to it for some time. As the Macron phenomenon came along we bought more Europe tracker funds, but we started a search for a high-conviction European manager. We appointed SW Mitchell Capital and Crux Asset Management. This is more change than we would normally have in a year.

CV: Andrew Bell

Andrew Bell became chief executive of Witan in 2010. He was previously head of research at Rensburg Sheppards Investment Management.

Before moving into investment management he worked at oil company Shell. Despite the fact it is everyone’s favourite area, I think Europe will surprise on the upside, I think profit growth there will be pretty decent. A potential contrarian play is the UK, as it has a lot of cheap stocks in it. But that cheapness is not likely to reverse until the Brexit and related political risks have been resolved. A reasonable value investor should be alert to the opportunities in Britain. Around 30pc of our assets are in UK shares.

There has been a lot of complacency in the past year-and-a-half in the stock market. I think it was better that we had a small correction now to restore valuations to decent levels to create a better platform for more durable gains in the future. It is difficult to see how we will get 15pc to 20pc growth, but there is nothing wrong with a few years of 3pc to 7pc growth. Aim-listed clean tech investment fund called Ludgate Environmental in about 2010 and it went down by about three-quarters. The overall ongoing charges figure is 0.79pc. More of our fund managers used to have performance fees, but the proportion has fallen from 70pc of the managers to 15pc.

We aren’t just looking for cheap managers, we want the highest returns for a price – in fact our strongest manager over the past three to four years has the highest fees. We hope to reduce costs, but my focus is to deliver performance after costs. I would rather deliver 4pc of outperformance on 0.75pc fees than 1pc of outperformance on costs of 0.5pc. At the end of last year Syncona was the second biggest holding in the fund. It is one of our directly invested assets.

It was set up by the Wellcome Trust to back good scientists building new pharmaceutical companies. It created an initial portfolio of £100m-£200m, but then at the end of 2016 it took over the Battle Against Cancer Investment Trust, which was previously a fund of funds. This means the healthcare portion of the portfolio went from 20pc to 50pc. On the back of that the trust’s shares went to trading on a premium of about 30pc to the net value of the assets and the share price went from about 130p to about 200p.

We have barely made any changes to the allocation, but it has become a