Multi-manager global investment trust Witan (WTAN) has dropped some high-profile fund managers from its portfolio after significantly underperforming its benchmark so far in 2020.

After a strong 2019, Witan said in a performance update it has been caught out by the big market sell-off following the coronavirus outbreak, with its higher exposure to UK and Europe and lower exposure to the US hurting performance.

In response, Witan decided it would no longer use the services of European fund managers Richard Pease of Crux Asset Management and Stuart Mitchell of SW Mitchell Capital.

The trust delivered a total return of -17% to the end of May, compared to -5% for its benchmark.

UK AND EUROPE HIT PERFORMANCE

It adopted a ‘new and simpler benchmark’ from the start of 2020, with lower UK content (19%, down from 30%) and a higher weighting in the US (46%, up from 25%).

But as a legacy from its previous benchmark, Witan said its portfolio was heavily represented in the UK and Europe and underrepresented in the US.

In view of the reduced political uncertainty in the UK and improving expectations for economic growth outside the US, Witan decided, ‘wrongly as it turned out’, to move only gradually to align manager allocations to reflect the more global structure of the new benchmark.

It added that this ‘proved costly’, with the UK (-19% to the end of May) and Europe (-7%) performing much worse than the US (+2%), which was boosted by its high weighting in technology stocks, whose prospects were enhanced by increased internet use during lockdown.

As well as terminating the Europe ex-UK mandates of Pease and Mitchell, Witan also sold its holding in the global systematic value portfolio managed by Pzena, with the majority of the proceeds being held in a US equity index ETF, pending the conclusion of a search for an additional more stylistically neutral global manager.

‘ATTRACTIVE CORE HOLDING’

Despite the underperformance this year, analysts at Numis still view the fund as an ‘attractive core holding’ for investors seeking global equity exposure.

Numis said: ‘It is interesting that Witan is seeking to make greater use of stylistically neutral or adaptable managers, rather than those who are more dependent on a style tailwind to generate performance, highlighted by the sale of the Pzena portfolio.

‘We understand that the managers of Witan believe that systemic deep-value investing will become increasing challenged as some industries are disrupted by technology, fiscal or regulatory pressures, as well as ESG factors and consumer trends.’

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Issue Date: 02 Jun 2020