Modern Witan looks to build on old roots

WITAN Investment Trust is a member of an exclusive band of billion pound investment funds, with Scottish origins. Although the trust skipped south to find fame and fortune in London, it was founded in 1909 as a vehicle for Alexander Henderson, the first Lord Faringdon.

Witan was cut from the same cloth that created Alliance Trust, Scottish Mortgage and Scottish Investment Trust, all of which remain firmly embedded in financial folklore north of the Border. These global trusts have served their investors well over the years. However, change is afoot and Witan will emerge from 2004 a different beast to its clan of contemporaries.

In October 2003, the trust announced that it intended to appoint other fund managers to work alongside its erstwhile manager Henderson Global Investors. Its board decided that it was in shareholder’s interests to seek the most talented managers from across the global funds market place to run the trust’s assets, having concluded that no one management house could be a leader in every field all of the time.

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This change in strategy was further influenced by a prevailing need for manager diversity in a volatile investment world, where investment companies are bought and sold or amalgamate with increasing frequency.

Furthermore, the investment trust industry is experiencing a hardening of corporate governance attitudes following on from the split capital fiasco. Boards are being asked to reaffirm their independence and to ensure that their investment managers are doing the best job for them and their shareholders.

These were all good reasons for change, but the fundamental aim was to enhance performance for shareholders. Nevertheless it was a radical move, at odds with the outside perception of the cosy relationship enjoyed between board and manager.

Since this announcement, the trust has looked hard at its investment strategy and found it has become more reliant on its benchmark index and over-invested in mature Western markets, while neglecting areas that could offer higher levels of growth. As a result, it is re-jigging its portfolio, placing emphasis on a low-risk approach where growth looks slow and applying the risk saved therein to more exciting areas.

This should enhance returns without making the overall portfolio any more risky or volatile. Included in the proposed portfolio are exciting innovations that depart from the normal blue-chip geographical configuration.

Witan will be investing over 200 million in a global focus fund, concentrating on the key trends across the world, on a best ideas basis. Also, the trust is committed to placing 135m within an absolute return portfolio.

These are hedge funds designed to capture improvements in markets while protecting investors from falls in the index. Absolute return funds also offer diversity in the context of an equity portfolio. This is a sensible approach. Witan’s assets should work harder, but its strategy must remain loyal to the premise on which its shareholders made their investment.

The trust is a globally diversified fund, suitable for the novice and as a core element of an experienced investor’s portfolio. As a result of this strong proposition, Witan is the home for over 20,000 accounts held on behalf of children through its Jump savings fund. It also provides the opportunity for investors to purchase Witan shares through a low-cost share savings scheme, or via the ISA product.

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Witan’s metamorphosis will be complete by autumn 2004. New fund managers will be at the helm. It is hoped that the current investors will see improving returns while potential shareholders will have access to a modern, innovative and value for money multi-manager portfolio, tailored for the mainstream customer.

Ironically, this revolution is not out of step with the original premise of Witan, Alliance Trust, Scottish Mortgage or Scottish Investment Trust. In another age, they brought the opportunity to invest in the future to the masses. Witan is returning to this energetic ethos while its peers will watch and note its progress.

Should the concept prove successful, other illustrious investment trusts may have to embrace similar winds of change, voluntarily or not.

James Budden is the marketing director for Witan Investment Trust