How Witan serves up decent returns from set of big hitters
I INVESTMENT trust Witan is an unusual beast. Unlike rival global funds that are ru run by ind individual managers presi presiding over whath companiesi to b buy and sell, it operates more like an orchestra.
Though Andrew Bell, a trust expert by profession, is chief executive, his role is not to compile a portfolio of global stocks and hope they come good. It is more to parcel out slices of the trust’s assets to some of the world’s leading investment firms in the hope that collectively they will deliver stellar returns.
As conductor, Bell’s role, aided by the trust’s boardroom, is to get the blend of managers – and asset allocation – correct so they make perfect investment music. When parts of the orchestra are not functioning as well as he wants, he gets rid of them, replacing them with new blood.
The investment approach was introduced in 2004 and has rewarded shareholders well, revitalising the trust’s fortunes along the way. Bell has been conducting since 2010.
Over the past ten years, the trust has comfortably outperformed its global peers, delivering a return of 156 per cent against an average for its rivals of 105 per cent. It has also beaten returns from the FTSE All-Share Index, the benchmark that investors should judge their investments against.
Yet tennis-loving Bell is a hard task master and is constantly striving for perfection. Though the trust’s one-year performance numbers look good in absolute terms – a total return of 24 per cent – he is acutely aware they lag behind the competition.
He says: ‘I monitor performance constantly. I get daily, weekly and monthly reports tracking how the fund is faring and how each of the chosen managers is performing. If I start to lose confidence in a fund group I will reduce the assets they manage on behalf of the trust. If things do not improve, I will then replace them.’
Bell has not been reluctant to show his ruthless streak. As soon as he took over at Witan, he replaced some managers in favour of those prepared to be more active in their investment approach. He also had reshuffles in 2012 and 2013.
Since then, his only change has been to wave goodbye to Trilogy Global Advisors, which managed Witan’s exposure to emerging markets.
A new firm has been approved by the board to run a similar mandate, though fee talks are ongoing. Witan uses ten investment companies to run tranches of its portfolio. They include well known UK brands such as Artemis and Lindsell Train, and international brands such as Marathon Asset Management and Tweedy Browne. A small slice of the trust is managed by Bell directly. This has a strong private equity bent, an area he knows inside out.
As a result of the strategy, Witan gives shareholders exposure to 486 stocks across 35 markets.
Bell is mindful that too much diversification could damage performance. He says: ‘We are trying to be exponents of good active management and want to show it can add value. On a score of 0 to 100 where 0 is a portfolio no different to the index and 100 is where they have no stocks in common, we are at just below 70. I would like to get it up to 75.’
Bell drives a hard bargain with the companies that manage the trust’s money. They are paid between 0.25 per cent and 0.8 per cent. Together with performance fees, the ongoing charge is 0.99 per cent – higher than some rivals.
Income is paid quarterly and, remarkably, dividends have risen for 41 consecutive years.
Jeff Prestridge