Witan Investment Trust (WITN) has seen its share price appreciate by over 19% this year to £10.41. Its CEO Andrew Bell explained the benefits of the fund's multi-manager approach despite a shaky start at a recent investment conference.
‘We choose managers who pick companies with high conviction that their choices will add value over time,’ says Bell. The trust moved from having former UK-listed asset manager Henderson as its sole manager after the firm suffered a ‘heavy landing’ following the dot.com crash of 1999-2000.
You can read about the use of multi-manager funds here but Bell says one of the potential pitfalls of this approach is ‘over diversification’. This occurs if a manager is running a large portfolio of stocks, the fund starts behaving like an index tracker. This was a charge made against Witan during the first few years of its multi-manager strategy.
In the early days, managers were chosen to outperform but as Bell says ‘the outperformance was quite modest so when blended together it ended up with something closer to the index than you wanted it to be’.
Now his external managers are those with high ‘active share’ or selections that don’t correlate with the funds benchmark. Witan’s benchmark is a composite of FTSE World indices, with 40% UK, 20% North America, 20% Europe ex-UK and 20% Asia Pacific.
One of the reasons that Bell wants the fund to be different to the benchmark is because ‘indices are a roll call of yesterday’s successes’. He wants the external managers to being looking at ‘prospects rather than history’.
The trust has revamped its external managers this year, bringing in Crux Asset Management and SW Mitchell Capital to cover European equities in October.
In February, GQG Partners took over the emerging markets mandate with £70m to invest in the region.
Given that Alliance Trust (ATST) started using a multi-manager process run by Willis Towers Watson this year after failing to beat its benchmark in 2016, Witan appears ahead of the game. Bell’s shake-up of his external managers this year demonstrates he’s ready to act if things aren’t going to plan.
The changes to the managers of Europe and emerging markets are due to Bell’s view these markets ‘give people a cheaper way of accessing an improving global economy’ and he expects the regions to drive growth.
