Investment Companies News

The £1.11bn Witan investment trust's multi-manager approach is now three years old, and has been vindicated by recent performance, but some of the underlying managers did not survive a strategic review in July.

Witan announced a rise in net asset value per share of 6.3% for the first six months of 2007. This compares to a rise of 5.7% in the FTSE All-Share and 6% in the FTSE World index. In total, the net asset value performance was 4.7% ahead of the benchmark, boosted by the trust's share buy-back programme. The trust will pay an interim dividend of 4.1p, up 5.1% on last year.

Of the underlying managers, the Henderson UK smaller companies team performed well. The enhanced index portfolios both performed well. The total UK portfolio, combining mainstream and smaller companies equities, would have been in the upper quartile of all non-specialist UK equity investment unit trusts and OEICs.

The performance of the portion of the US portfolio managed by Brandes and Southeastern continued to improve, but the performance of Wellington is still giving the board cause for concern.

The board undertook a strategic review in July. APS, the manager of the Asia ex-Japan portfolio, was replaced by Comgest and Orbis, who will manage £56m and £20m respectively.

Comgest is a Paris-based Asian and emerging markets specialist. Orbis is based in Australia and the whole £20m will be invested in its Orbis/SM Australia Equity fund. The board believes this area with its emphasis on financial and mining stocks tends to provide good diversification away from traditional equity markets.

The trust is currently operating with no gearing. In June, the board raised cash from the fund managers, reducing gearing from 10%. Although the board had no worries about the medium-term outlook for world equity markets, it believed investors were ignoring potential risks.

Chief executive Jim Horsburgh says on the current markets: 'If this turbulence results ultimately in a more sensible pricing of risk, then, in the medium term, we would regard this as a very positive event for Witan shareholders.'

The share buyback programme has kept the discount more stable. Yesterday's share price was down 1p to 454.5p. It is currently at a discount of 10.4% to NAV.

The giant trust has come a long way since the days when it was exclusively managed by Henderson with mixed results. The multi-manager approach has generally been successful and the board's willingness to take an active approach to selecting managers is to be applauded. It is no longer a sleeping giant.