MULTI-MANAGER FUNDS in Association with Visit Call 0800 082 81 80

“Anyone can hold the helm when the sea is calm.” supplement Publilius Syrus (100 BC)

For today’s discerning financial and investment professional When markets are volatile, you need a steady hand on the tiller. Witan’s multi-manager approach could offer you a smoother course through choppy waters. Everything you Wanted to Know about Investment Trusts (But Didn’t Dare Ask) Witan is the only fully multi-managed, global equity investment trust. Which offers you a double benefit - we’re constantly Multi-Manager Strategies for De-Risking striving to perform better than global equity markets and Targeted Diversification and deliver a growing income - and by virtue of being a multi-managed fund we aim to smooth out the volatility Asia Pacific – Is It Time to Buy? associated with a single manager.

In essence, Witan offers you diversified exposure to the world’s major equity markets so that you gain diversification by manager, geographical region, industrial sector and individual stock. It’s all designed to help you enjoy a smoother passage to help realise your investment goals.

At Witan, we hope many years of plain sailing await you. Anchors aweigh! Contact us today, to find out more.

Witan Investment Trust is an equity investment. Please remember that past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise, as a result of currency and market fluctuations, and you may not get back the amount originally invested. MULTI-MANAGER FUNDS in association with Visit www.witan.com Call 0800 082 81 80

Issued and approved by Witan Investment Services Limited. Witan Investment Services Limited is registered in England no. 5272533 of 14 Queen Anne’s Gate, London SW1H 9AA. Witan Investment Services Limited provides investment products and services and NOVEMBER 2015 SUPPLEMENT 44 is authorised and regulated by the Financial Conduct Authority. Calls may be recorded for our mutual protection and to improve customer service.

WIT10749 297x210 HELM WHAT INVEST.indd 1 23/07/2015 11:28 Witan Cover 42.indd 1 26/11/2015 13:47 November 2015 Intro

What’s the single most obvious thing that you know about investor behaviour over the last six months? That private clients have been nervous of course - worried by a combination of Eurozone indecision, a Chinese slowdown in the face of a correction, and a growing sense that it’s only a matter of time before the US Federal Reserve starts raising interest rates, in order to hold back a resurgent growth rate that most of us can only wish we had in our own markets

What else? That people Tell-Tale Signs being channelled into income- are potentially tapping And would you be impressed producing funds that, with luck into their pension funds to know that the demand for and good management, will keep in the aftermath of the investment company shares this their owners in deeper clover April pension freedoms, Summer was strong enough than the annuities where they and paying off their to push down the average would once have had to go. mortgages and their discount rate by 0.4% to 2.9% Controlling the Risk overdrafts. So, why would in August alone? That’s just anybody want to commit 0.5% off the all-time record low Ah, you’ll say, but investment to equities at a time like of June 2015. And, as we’ll be companies are a little tricky, aren’t this, when prices have explaining shortly, that’s a pretty they? Well, that might once have dropped by 18% or more? convincing vote of confidence in been the consensus in the days the merits of active management when consumers were wary of It might surprise you to at a time when trackers have the unfamiliar aspects of these read the latest data from the been in retreat. (Bear with vehicles. But what’s this? Many of Association of Investment us if the whole business of the strongest-performing, retail- Companies (AIC). It suggests premiums and discounts makes focused investment companies, that net fundraising among your head spin; all will be according to Ms Brodie-Smith, investment companies (which revealed in the coming pages.) are the very big ones, including includes investment trusts, As AIC Communications Scottish Mortgage and Witan. offshore investment companies Director Annabel Brodie-Smith The essential thing here, and venture capital trusts) tells us, it’s not the safe-as-milk according to industry observers, is during the first eight months risk-averse options that are that investors know they’ve got to of 2015 was more than the making all the ground. Rather, take on more risk if they want to total for any full 12-month she says, “it’s the specialist, beat annuity rates, but that they’d calendar year in history. higher yielding sectors which rather leave it to an expert who This is a colossal £3.9 billion continue to raise the most money can diversify the risk while also vote of confidence in a sector and attract the highest ratings.” letting managers do what they’re that used to be regarded I don’t know what that paid to do. It’s all about getting the with a little scepticism. says to you, but what it says right balance and, for many, that Now, for the sake of to me is that clients are will mean using multi-manager clarity, investment trusts getting more sophisticated funds; relying on experts to select (‘IT’s) are often referred to and more knowledgeable the best managers for benchmark- as investment companies, about investment companies. beating performance returns. and we will use these It probably also reflects the We’re not going to spend the terms interchangeably fact that a large proportion of next few pages going through throughout this feature. that pension-freedoms cash is the basics of the multi-manager

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II Introduction Sales of investment trusts have hit record levels this year, says editor Michael Wilson. Partly that’s because the pension freedoms have set canny investors on the trail of index-beating returns. How can multi-manager strategies optimise the returns?

V Back to Basics Our no-nonsense guide to how investment trusts work - or should we call them investment companies? Remember, you’re among friends. No question is too silly to ask

VIII The Multi-Manager Advantage How a dynamically-managed team of active fund managers can enhance market, but of the whole performance, reduce risk and respond to investment trust/investment opportunities faster. Fund of funds or multi- company business itself. managed? We compare and contrast We’ll be comparing the various ways of achieving an efficient, XII cost-effective multi-manager The Witan Experience operation. But let’s 109 years in the business, and going make sure we can strong. Chief Executive Andrew Bell walk confidently explains how the company’s headlining before we start a Witan Investment Trust works baton relay team. Many thanks to everyone who has XVI contributed to this supplement. And Pacific Prospects please do write in Nobody said it was going to be easy this to us at editor@ year. But dynamic geographical allocation ifamagazine. strategies in which China plays a fairly com with any small part have done much to put the comments you may Witan Pacific Investment Trust in the have. right place for a re-emerging region

Mike Wilson Editor

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Witan - Intro and Contents.indd 3 26/11/2015 13:53 “ Wolde ye bothe eate your cake, and have your cake?” John Heywood, 1546

The Witan multi-manager approach – aiming to deliver both income AND capital growth.

Witan is the only fully multi-managed global equity investment trust. Our carefully selected range of fund managers picks the stocks while Witan directs the overall portfolio strategy. The goal is to outperform the relevant equity benchmark and to grow the dividend faster than the rate of in ation. Naturally, this cannot be guaranteed so please read the risk warnings carefully.

By playing to the individual strengths of our managers we strive to reduce volatility which can arise from being dependent on a single manager. What’s more, Witan offers exposure to the world’s major equity markets, diversied by manager, geographical region, industrial sector and individual stocks. All of which could help your clients to both have their ‘investment cake’ and eat it…

Your clients can invest in Witan Investment Trust plc in a number of ways. Witan’s shares can be traded through many online platforms. Witan is also available for investment via an ISA, share plan and children’s savings schemes.

40 year growth in Witan’s dividends per share versus UK Retail Price Index† 5000 * Witan dividend (pence per share) Witan Investment Trust plc is an equity investment. RPI Index 4000 Please remember that past performance is not a guide 3000 to future returns. The value of an investment and income 2000 from it can fall as well as rise, as a result of currency 1000 and market uctuations and you may not get back the 0 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 amount originally invested. †SOURCE: Datastream. Both data series have been re-indexed to 100.

Visit www.witan.com Available on a number of online platforms

* 40 YEARS OF CONSECUTIVE DIVIDEND GROWTH

FOR FINANCIAL ADVISERS ONLY. Issued and approved by Witan Investment Services Limited. Witan Investment Services Limited is registered in England no. 5272533 of 14 Queen Anne’s Gate, London SW1H 9AA. Witan Investment Services Limited provides investment products and services and is authorised and regulated by the Financial Conduct Authority. We may record telephone calls for our mutual protection and to improve customer service. Please see the disclaimer at the end of this supplement

Witan - Investment Trust.indd 4 26/11/2015 13:55 SUPPLEMENT November 2015 “ Wolde ye bothe eate your cake, and have your cake?” What’s So John Heywood, 1546 Difficult About The Witan multi-manager approach – aiming to deliver both income AND capital growth. Investment

Some people don’t think it is possible to do both. At Witan we think differently and, since 2004, our specialist investment managers have helped enable Witan shareholders to have their cake and eat it too. Companies? Witan is the only fully multi-managed global equity investment trust. Our carefully selected range of fund managers picks the stocks while Witan directs the overall portfolio strategy. The goal is to outperform the relevant equity benchmark and to grow the dividend faster than Perhaps we shouldn’t be so very surprised that many the rate of in ation. Naturally, this cannot be guaranteed so please read the risk warnings carefully. financial advisers are still a little unsure about investment

By playing to the individual strengths of our managers we strive trusts – how they operate, how they’re structured, and to reduce volatility which can arise from being dependent on a single manager. What’s more, Witan offers exposure to the world’s how they behave under different market conditions. major equity markets, diversied by manager, geographical region, The overriding focus of the regulatory system over the industrial sector and individual stocks. All of which could help your clients to both have their ‘investment cake’ and eat it… last decade has been on evening out the bumps for Your clients can invest in Witan Investment Trust plc in a number of our clients in any way possible – a pressure which, for ways. Witan’s shares can be traded through many online platforms. Witan is also available for investment via an ISA, share plan and many, has tended to mean that we’ve focused on children’s savings schemes. open-ended investments such as OEICs and trackers

40 year growth in Witan’s dividends per share versus UK Retail Price Index† of all kinds. And that’s a pity for any number of reasons 5000 * Witan dividend (pence per share) Witan Investment Trust plc is an equity investment. RPI Index The one thing that most 4000 Please remember that past performance is not a guide people seem to focus on is 3000 to future returns. The value of an investment and income that closed-ended products, 2000 from it can fall as well as rise, as a result of currency including investment 1000 and market uctuations and you may not get back the 0 trusts, can be more volatile 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 amount originally invested. than their open-ended †SOURCE: Datastream. Both data series have been re-indexed to 100. counterparts. They depend more immediately on the skills of the active managers who run them. And, unlike Visit www.witan.com open-ended funds, which will Available on a number of online platforms simply sell down a portion of their assets whenever the clients decide to make their exits, investment companies * tend not to be affected by client demand when making 40 YEARS OF CONSECUTIVE DIVIDEND GROWTH investment decisions.

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They are, after all, The most important change, Four Things You Didn’t investment companies with from our point of view, is Know Trusts Could Do portfolios of assets whose that multi-manager trusts But there are other surprises values are subject to the have been able to assemble that some advisers won’t same market pressures as a dynamic portfolio, so as be fully aware of. The first any other shares. (The word to spread and diversify the of these is the ability of an ‘trust’ is a bit of a misnomer portfolio in ways which do investment trust to ‘smooth’ when it comes to investment more than just dilute the its returns to investors. and applies more to the volatility risk – rather, they relationship between the Now let’s think about are actually well placed to riff independent Board of Directors that for a moment. We’ve on the different characteristics and shareholders.) When Mr always been trained to think of various markets, products Market is keen to buy, the of investment trusts, with and investing styles. That can value of those shares goes up, their fixed volumes of share perhaps disproportionately; provide a combination of two issues, as ‘sealed’ investments. when he decides to sell, they great advantages – firstly, the Surely, you might ask, once come under pressure. ability to capitalise on the ‘on the assets are in the sealed the ground’ knowledge that bag the only way it can grow Sophistication and Safety Too specialist managers can bring or shrink is either through But the last few years have to the equation, and secondly the growth (or shrinkage) brought a growing awareness the ability to ride out periods of of its net asset values, or that some of the assumptions uncertainty, thanks to the risk because the market has we’ve made in the past are diversification of a properly become agitated enough to not so very true anymore. multi-managed approach. drive up (or down) the value

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of the fund– thus increasing and potential shareholders. any case, with trackers any or decreasing the discount (or A second surprise is the yield return that might have alternatively, the premium) ability of investment trusts to been is effectively swallowed to NAV of those funds? hold cash, at least for a year up by the management Yet the recent trend or two. Yes, we know that costs, so people tend not toward share issues or a newly-launched fund will to notice their absence. buybacks signifies a change often keep its money in the Investment trust buyers, of direction for investment bank for a year or so until it’s however, not only receive trusts, which has decisively all been allocated to equities, dividends but – in contrast shifted our perception of or whatever. But what about to open-ended fund buyers – just how flexible they can the ability to return a limited they can expect to see those be. From an investor’s point proportion of the portfolio to dividends being protected by of view, the ability to issue the safe harbour of cash? I smoothing. The difference or buyback can help to can think of some Chinese smooth its returns; from the investment companies that is that OEICs are required manager’s viewpoint, it can dodged the 2011 downturn to distribute the income improve the attractiveness quite spectacularly by holing they generate each year to of the shares to buyers. But, up in cash for a while once investors, which means that generally, being active in the storm clouds gathered. their income payments are share buybacks and issuance Try doing that with an vulnerable when companies’ is regarded as responding open-ended fund, and you’ll profits are weak; ITs, however, to the market to ensure quickly realise that it isn’t can hold back cash so as liquidity in the company’s a realistic possibility. to provide a more reliable shares for its shareholders A third factor which yield for income investors. many advisers don’t take But this isn’t even the into account is the ability of biggest advantage of the yield some funds to leverage. There strategy. Because ITs tend are invariably mandated to hold for longer periods, limits on how much leverage reinvesting the dividend can can be taken on board by snowball absolute returns investment trusts – with the surprisingly quickly. And actual level generally rising because a company share when the managers feel that that’s carrying a good opportunities are attractive, dividend is itself likely to and reducing when things look accumulate capital value like taking a downward turn. more quickly, a virtuous circle The Yield Advantage can develop which can be And so, finally, to the thoroughly beneficial. There question of yield. Now, there are many thousands of IT are a lot of tracker investors investors out there who find who never see a yield at that their annual dividend all – they tend, after all, on an investment trust is to be focused rather more actually greater than the on capital growth than on capital sum that they spent earning a yearly return. In when they bought it.

The Association of Investment Companies estimates that the average level of leverage for UK-domiciled trusts is typically around 7%, and that only a couple of dozen funds will hold more than 15% at any one time. (Witan’s current gearing is around 10%.) On closer inspection, many of the most exposed will be found to be built around non-equity activities such as property, which is inevitably leveraged. (Equity funds are generally far less exposed.) Just nine trusts were holding more than 24% at the end of 2012, according to the AIC, of which all but four were global or country-specific funds

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So we’ve established that investment trusts have a quite different sort of character from the open-ended funds that still tend to preoccupy advisers’ thoughts when they think about their clients’ needs – especially those who prefer a conservative approach. And the cause, as we’ve seen, is price volatility

Being closed-ended, with a yielding investment trusts has Okay, we’ll agree that fixed number of shares, any lent new impetus to the demand investment companies were one investment trust on its for funds which specifically aim unlikely ever to feature on the own can become liable to to beat the paltry rates you can menu for widows and orphans the push-and-pull pressures get from your bank. Of course, – despite the fact that income of the marketplace. If the beating the FTSE yield by a smoothing may well suit more demand’s strong, the share significant margin might mean risk adverse clients and that price may be driven up taking on an elevated level of they have a Board of directors into premium territory risk - some of the heavier and who represent and protect against net asset value; if more old-fashioned industries, shareholders’ interests. And it weakens, then the shares for instance, with lower capital we’ll add that, even this year, may trade on a bigger than growth prospects, or perhaps a a total investment inflow of usual discount to NAV light smattering of high-yielding around £500 million a month until the mood improves. paper which needs keeping is modest by the standards of That’s partly why ITs have under constant surveillance. the OEICs industry. But the traditionally attracted wealthier Using a multi-manager or growing popularity of fund and less risk-adverse investors multi-fund approach can be an of fund or multi-manager than OEICs – indeed, it’s why excellent way of diversifying approaches that combine for many years investment your risk whilst still aiming dozens or maybe hundreds of trusts weren’t allowed to for an optimum return. separate investments is a telling reminder that the public is advertise directly to the public. Strength in Numbers catching on to the diversification But times change. And, with the potential that a multi- manager take-up among private investors But we’re getting ahead of ourselves. The growth of interest approach can bring. rising steadily, the perception in investment companies that investment trusts are of all shapes and sizes is a The Widest Range of Coverage ‘difficult’ is being slowly eroded. thoroughly good thing, not But what all the major providers We also need to remind least because the post-RDR of multi-manager funds (both ourselves here, of course, that the landscape requires advisers to open- and closed-ended) historical absence of commission consider all mainstream forms will tell you is that the key payments is a good part of of investment when talking advantage of multi-manager the reason why investment with their clients, while also set-ups is that they draw on companies haven’t been surfacing abolishing the commission the various specialist skills onto IFAs’ radars in the past. structure that used to put them of managers who are getting At the same time, the at a disadvantage against open- paid to focus solely on their growing interest in higher- ended investment providers. various spheres of expertise.

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If you want to maximise better than others at particular tolerances. We can expect to your chances of navigating the activities. Some, for instance, see this frankly prejudicial waters of China or Vietnam will have strengths in corporate assumption coming under or Latin America successfully, debt; others will excel in increasing fire in the coming you’re better off making sure currency trading (which can years as the appetite for that your investment is run by be highly critical). Some will high total returns evolves. somebody who’s been doing it be good with large companies However, it’s not too for decades, not somebody who and infrastructure projects, much of an exaggeration to operates from a desk in London. while others may have a say that a properly-structured If you know that a region, or golden touch with technology multi-manager approach can country of interest is potentially investments. A few will bring work as a fully-fledged risk volatile, where else will you skills in private equity or management tool, allowing find the watchful eye that can absolute return strategies. the overall managers to adjust spot forthcoming turbulence in Others will be selected because their exposure dynamically the local press and, with luck they are experts in a specific to the various markets and skill, allow you to sidestep region. But whichever way they cover. That’s a benefit the trouble at short notice? you look at it, there’s an which also contributes to the And isn’t it likely that, by obvious advantage in bringing performance of the company’s spreading your investment them all together within one other projects. A real win-win.. around a small number of investment, which the client can specialist management groups, purchase in one transaction. Meanwhile, Deep in the Jungle you can improve your chances of In case you hadn’t noticed Let’s return, however, to the achieving an overall return that yet, all of this diversification is point we made in the last beats the index, even if one or working against the traditional article about how investment two inevitably underperform? view that investment trusts trusts are often able to That’s not all. As you’d are really just for sophisticated exploit niche opportunities expect, some managers are investors with higher risk in emerging markets and so

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forth. Because ITs don’t suffer trying to sell that fund at the from the problem of investors same time, and they don’t withdrawing their cash at have any priority, which inconvenient times (and thus may mean losing precious forcing them to sell when they’d quarter-hours and having to rather hold), the IT structure accept the consequences. allows managers to commit to a Whereas a more hands- market for as long as they wish. on multi-manager, of the type This is something really we’ll be looking at shortly, rather special for emerging can choose their moments in countries, which are often wary confidence and ensure they of foreign investors departing have sub-managers who are as quickly as they’ve arrived. effectively working specifically It means, in effect, that only for them. That’s something closed-ended funds are properly that can make a critical able to break into small but difference to performance. growing markets in Africa or the Far East. But if we want to What About Charges? temper the volatility which can There’s also the ‘small’ point often prevail in such markets, of charges to consider. If the the risk-spreading benefits provider has simply set up a of a multi-manager strategy funds-of-funds approach and become obvious at once. bought a little of each of a variety of funds, the way that hedge Funds of Funds – funds often do, he’s going to have The Pros and the Cons to deal with a whole pyramid For some investment managers of management costs (‘layering and, indeed probably the of fees’) that could quickly majority, the art of running become a drag on growth. (Let’s a fund of funds is to save on remember, please, that ITs are sweat and shoe-leather by invariably actively managed.) simply placing the bulk of 1% here and 1% there can their portfolios in a variety of quickly add up to a wedge that other funds ; some of which wouldn’t bother a high roller may be investment trusts, with a hedge fund, but which but which may also include would certainly deter many OEICs, bond funds, managed more modest and risk-averse commodity funds and so forth. investors. Very many funds-of- And why not, you might ask? funds are running total expense The clear advantage is that ratios (TER) above 2.5% a the fund of funds’ overheads year, compared with a typical come down drastically. When 1.5% for a standard OEIC. the only really important Some, which we won’t name decisions of the parent Company here, are nudging 3% by the becomes which funds to allocate time the full Ongoing Charges to, the whole situation becomes Figure has been calculated. simpler. And more liquid, too, So let’s start with the presumably, because they welcome observation that several can switch assets without multi-manager funds operate having to bother about the gross expense ratios of between hefty dealing charges that 1% and 2%, and take it from sub-fund holdings need to there. How do they do that? cover. A single transaction and they are in, or out. It’s All About the But consider this. By taking Management Structure no direct role in the running Principally, by not simply or steering of the sub-funds, holding sub-funds, which can be the fund of funds manager is expensive, but by ‘farming out’ insulated (for want of a better their assets proportionally among word) from the investment between (typically) three and process. If a crisis should arise, twelve managers, with each one they may find themselves just being responsible for a particular one of hundreds of investors management approach.

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Witan Investment Trust – Multi-Manager Structure (as at 31.12.2014)

EQUITY MANDATE MANAGER BASED IN % OF PORTFOLIO Global Veritas London, UK 12.6 UK Lindsell Train London, UK 11.8 Global Pzena New York, USA 9.8 UK Artemis London, UK 9.6

Asia Pacific inc. Japan Matthews San Francisco, USA 9.7 Global Lansdowne Partners London, UK 9.5 Global MFS Boston, USA 8.7 Pan-European Marathon London, UK 7.3 Direct Holdings Witan Executive Team - 6.7 UK Heronbridge Bath, UK 6.6 Emerging Markets Trilogy New York, USA 3.3 Global Tweedy, Browne Stamford, USA 3.2 Japan open-ended funds 1.2

Source: WM Company Witan Pacific Investment Trust – Multi-Manager Structure (as at 31.01.2015)

Aberdeen Asset Management 44.9 Matthews 44.4 GaveKal 10.7

Source: WM Company Please see the disclaimer at the end of this supplement

For example, the (US) (in a portfolio directly managed savings; you’re able to negotiate Northern Multi-Manager Large by the Chief Executive and tighter fees than you could Cap Fund allocates 25% of its Investment Director), just with a much smaller AUM. portfolio to managers Jennison to prove that ITs really can And, of course, there’s the buy pretty well anything. (with a responsibility for prospect that the management “aggressive growth”); 30% to So let’s return to that contract will be a long term Delaware (“deep value”); 25% question we asked earlier. relationship and not just a brief to Huber (“traditional value”) How do the fees and charges dalliance that’ll last until the and 30% to WestEnd (“sector stack up? Witan Investment current dance is over. It all and stock concentration”). Other Trust has an ongoing charge of goes to making the proposition types of funds may require values 0.74% of net assets, or 0.96% more attractive to a manager such as “opportunistic”, “active including the performance fee so that fees can be minimised. quantitative value” (whatever (both figures to the end of the that is), “bottom-up” or “relative company’s last financial year That leaves the central value”. It all depends on what ending 31.12.2014), while Witan administration with the task of the fund is trying to achieve. Pacific Trust carries a 1.06% pulling it all together, monitoring The £170 million ongoing charge which rises to manager performance and taking (approximately) Witan Pacific 1.12% with the performance decisions to augment what the Investment Trust employs only fee (both figures to the end of managers are doing with actions three managers (Aberdeen Asset the company’s last financial of Witan’s own. Plus, of course, Management 44.9%, Matthews year ending 31.01.2015). taking care of the shareholder 44.4%% and Gavekal 10.7% as How is that achieved? relationships through at 31.01.15); but as you can see According to Witan’s Andrew advertising and promotion, above, when it comes to the £1.8 Bell, when you’ve got the best newsletters and factsheets, billion Witan Investment Trust part of two billion pounds and – last but not least – there are 11 external managers, under management you’re in a ensuring overall compliance plus a handful of other funds position to make enormous cost with The FCA’s rules.

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Editor Michael Wilson talks to Witan’s Chief Executive Andrew Bell about life, the universe and getting the very best out of your managers

One of the first things Witan on their watch lists that most investors need to keep the price buoyant? to learn about investment trusts is that the shares Heritage Matters “But it’s safe to often trade at a discount It might, of course, be simply assume that to net asset value. That’s to that Witan Investment Trust the venerable say, the price per share is is too big to be considered less than the value of the vulnerable. At around £1.8 company with its underlying securities. And billion (September 2015), 109-year heritage the second is that this is it’s probably six to ten times a completely normal and bigger than the median- would have been healthy state of affairs (in sized fund of its type. regarded as a ‘safe most cases). IT prices are It might be that its 109-year pair of hands’” invariably marked down history speaks for itself - and against asset values, so as that its shareholders are known to take account of the costs to be a particularly loyal bunch that would be incurred if who have grown up and even the fund were ever to be grown old with the flagship liquidated at short notice. of the UK investment trust with its 109-year heritage (That and the fact that industry. Originally formed in would have been regarded as a selling off big chunks of 1909, Witan joined the London ‘safe pair of hands’. That kind equity will invariably tend Stock Exchange in 1924 and of a reputation never hurts. to drive prices down, so it’s went on to found the Henderson a self-fulfilling prophecy.) Group, which it floated in 1983, A Broad Investing Base How, then, to explain remaining a shareholder of 2004 was, of course, another the fact that the Witan what is now called Henderson world from the one we Investment Trust has been Global Investors until 1997. inhabit today, and there were trading instead at a modest Of course, the multi- premium instead of a discount manager strategy was not challenges ahead, which even in recent months? (1.2% in there from the very beginning the canniest analysts couldn’t July, 0.46% in September.) – rather, the company became foresee at the time. When Or, to put it simplistically, a multi-manager specialist in the crunch came in 2008, the that there’s a big enough 2004. But it’s safe to assume test of the fund’s approach queue of investors with that the venerable company would be a matter of public

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record. And I suppose you Indeed, if it were very effective to hold the shares could say that the fact that it unhappy it could simply in another manager’s funds outperformed its benchmark switch the management to directly. (It saves, for example, in eight of the next nine another team from another the cost of ensuring adherence years is a good place to start manager. And, while there to all kinds of compliance and looking for evidence (albeit, are no reasons to expect any governance issues in out-of- the Company would stress such need, it’s another layer the-way places.) Otherwise, that past performance is not a of security for shareholders. though, the important point guide to future performance). How does that work? In to note is that the appointed The factor that seems effect, each of the managers managers are running their glaringly obvious is that is allocated a slice of the Witan (which describes overall fund portfolio and allocation of Witan’s funds itself as the UK’s “only is given a benchmark directly on behalf of Witan. fully multi-managed global against which it must try to Witan also bypasses equity investment trust”) outperform. Witan’s central the managers, in certain maintains a relatively role is to determine the circumstances to make mainstream portfolio. So how allocations, and also to make direct investments, when does an actively managed available any gearing that there’s an asset class that fund beat its benchmark? might be appropriate to the they would like specific “It’s all about situation (or none at all). exposure to, or where the entrepreneurship”, says There are a couple of external managers do not Andrew Bell. The point is exceptions to this direct- have expertise. Listed private that an active multi-manager management rule, says Bell. employs the various respective When it comes to relatively equity was one example that managers to do what they’re smaller exposures, such as the Bell mentioned to us. Up to respectively good at. And Emerging Markets element 10% of the total portfolio (at for each manager, that within the Witan Investment the time of investment) can might be a different thing. Trust, it can prove more cost- be invested in this way. You might say that the overall manager’s function (i.e. Witan’s) is to bring it all together so that each Witan Board instrument in the orchestra is making its contribution. Harry Henderson Andrew Bell And to decide when to change the tempo or when Chairman Chief Executive Officer to bring on the fortissimo.

Hands-On Management The defining point about Witan’s strategy is that, on the whole, it doesn’t hold third-party funds but appoints managers (currently eleven of them) to manage discrete portfolios. The general effect is rather similar to what you’d get from a fund of funds proposition but, says Bell, it has the additional advantage that it gives Witan the ability to know at any one time exactly what any of its holdings are worth. Appointed a director Appointed a director There’s a particular in 1988, becoming and Chief Executive advantage to this, he says. Chairman in March 2003. Officer from February If the markets should ever stumble, or if any mishap He was formerly a partner 2010. Previously he should occur, having direct of Cazenove & Co. worked at Rensburg control of the management Sheppards Investment chain means that Witan can Management Limited move faster than if it were as Head of Research. ‘just another shareholder’.

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Witan Board

James Bevan Robert Boyle Catherine Claydon Director Chairman of the Chairman of the Audit Committee Remuneration and Nomination Committee

Appointed a director Appointed a director in Joined the Board in in 2007. He is Chief 2007, he is a Chartered 2009. Previously she was Investment Officer, CCLA Accountant and a Managing Director Investment Management. was a partner of in the Pension Advisory Previously he was the PriceWaterhouseCoopers Group at Goldman Sachs CIO at Abbey. LLP. (1992-2007) and Lehman Brothers (2007- 2008).

Suzy Neubert Richard Oldfield Tony Watson Director Director Senior Independent Director

Joined the Board in Joined the Board in 2011. Appointed a director in 2012. She is Sales & He is chairman of Oldfield 2006 and appointed Senior Marketing Director at Partners, an investment Independent Director in J O Hambro Capital management arm. 2008. He is a non-executive Management, which she director of Hammerson plc, joined in March 2006. Lloyds Banking Group plc, Vodafone Group Plc and the Shareholder Executive.

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Witan Pacific Board

Sarah Bates Dermot McMeekin Chairman Senior Independent Director and Nomination and Remuneration Committee Chairman

Took over from previous Appointed in May Chairman Gill Nott on her 2012, a Solicitor and retirement in June 2014. Management Consultant Prior to being appointed who brings over 20 years Chairman, Sarah was a of on-the-ground country Non-Executive Director experience across Asia. of the trust for 11 years.

Andrew Robsen Diane Susan Audit and Management Seymour-Williams Platts-Martin Engagement Independent Independent Committee Chairman Non-Executive Director Non-Executive Director

Appointed in July Appointed in June Appointed in July 2014 2014 and becoming 2010 and adds to the and brings to the Board Committee Chairman Board some 30 years of considerable knowledge in 2015, a qualified investment experience, of investment companies accountant with over 15 including the management and investment years of corporate finance of Asian equity portfolios management generally, experience, including and Asian asset having spent 26 years in with Asian companies. management businesses. a range of senior roles.

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Witan - The Philosophy.indd 16 26/11/2015 13:57 SUPPLEMENT November 2015 The Pacific Scenario

And so to the Witan Pacific Investment Trust

With gross assets of around Investment Services and the expect such a need to arise, but £170 million (as at 31.10.15), Board of Witan Pacific the ability the important point is that Witan the Witan Pacific Investment to know at any moment exactly Pacific, as with Witan, has the Trust was initially part of what any of its holdings are worth. ability to move quickly and safely F&C’s operation, becoming Well, that’s almost correct, if its wishes, adding another layer focused on Asia during the because Gavekal is the exception of security for shareholders. 1980s and moving to Witan that proves the rule. Maintaining Moving onto the wider Investment Services in 2005 only around 10% of the overall market, Bell (in his capacity under a multi-manager Witan Pacific portfolio, Bell says as Managing Director of Witan arrangement. The idea, as that it has proved more cost- Investment Services and Witan’s Chief Executive effective to hold the Gavekal spokesperson for Witan Pacific) Andrew Bell puts it (Andrew Asian Opportunities Fund has a number of thoughts, is also Managing Director of (UCITS) directly. Whereas including what’s happening with Witan Investment Services, the Aberdeen and Matthews China. He said: “I think a lot of which provides operational managers are running the funds the China angst is more about oversight to Witan Pacific), directly on behalf of Witan the Chinese stock market than was that Witan Investment Pacific in segregated accounts. the economy. The economy, Services should ‘oversee The advantage of doing this certainly, is slowing, that’s a operations on behalf of is clear. Should something go known story. From 10% growth the Board, which has wrong, or the markets take a dive, five years ago to 4% or 5% in ultimate responsibility. then Witan Pacific can quickly five years’ time. And that’s OK As with Witan Investment take decisive action because it too – it’s only the transition Trust, Witan Pacific doesn’t hold has direct access to the assets. which is difficult to manage.” third-party funds but appoints This means that the Board can The market was effectively managers (currently Aberdeen move very fast – Witan Pacific geared towards growth, Bell says, Asset Management, Matthews is not just another shareholder and it’s that climb down from Asia and Gavekal, of which of an open-ended fund. those inflated expectations of more anon) to manage discrete Furthermore, if it was growth that has caused most of portfolios. The general effect is unhappy with any particular the damage. “It actually became rather similar to what you’d get aspect of the management a complete casino,” he concedes. from a fund of funds proposition, process, it could simply switch “And it looks as though there was but, says Bell, it has the additional to another team from another some official connivance in the advantage that it gives Witan manager. There is no reason to way that the situation developed.”

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5% 26% CHINA/HONG KONG SOUTH JAPAN KOREA 29% 6% 5% TAIWAN

INDIA

3% THAILAND 1% 3% VIETNAM THE PHILIPPINES

1% MALAYSIA

Source: BNP Paribas as at 31.07.2015 BNP Paribas Source: SINGAPORE 11% 4% Geographical INDONESIA Spread of the Witan Pacific Trust Portfolio, July 2015

6% The local market went up discount opened by about 150% between last year up. Yes, says AUSTRALIA and the peak in the spring of Bell, but this 2015, Bell notes, and that was was a doubly completely decoupled from the cruel turn of domestic economy. “So the fact fate because no that it’s on the way to halving sooner had he quit from its peak doesn’t mean than the fund rose substantially that the economy’s crashing – along with the spike in the uncertainties rather, it means that the stock market. “Having had a relatively in the Chinese market rippling market bubble has imploded.” trusting attitude, based on his out into other Asian markets? Sure, Bell says, the perceptions of good management Mr Bell hardly even winced. government did try some “cack- in the west, he got caught out by “No, that’s not a new story, handed defences”, such as using a few scallywags, though the fund but yes, it’s the most relevant its leverage among the banks outperformed the Chinese market thing for us to be watching.” both during and after his tenure.” to force them into supporting What’s made it hard, says the market – altogether, some Bell again: “For sure, the Bell, is that the China share $300 billion seems to have world should pay attention to price collapse has coincided been deployed just to stave off China’s economy, but it’s slowing with a halving of the oil price the image of weakness. But and not cratering.” And anyway, and a drop in demand for now that it’s abandoned its he adds, most foreigners don’t commodities – something attempts, we’re probably in a actually own any shares in the that provides the mainstay better place. But surely, we domestic A shares market, which for many other emerging asked, China can be a pretty was where the bubble developed economies, such as Indonesia hard market to read at the best and actually, he adds, most for example. It’s inevitable of times? Corporate governance Chinese don’t own them either. that those developments will isn’t always of the best, and the So the backwash from the create a lot of pressure. invisible strings that link the Chinese market collapse on commercial sector to the very the overall Chinese economy Meanwhile, Across the Pacific... powerful regional governments will be quite modest, he says. And now, just to make things has been a complicating factor? In any case, the growth of the more interesting, the US No-one knows this better economy has been focused up Federal Reserve is close to a than Anthony Bolton, the former until now on infrastructure, decision on raising US interest Fidelity star manager who came whereas now it’s moving more rates – something that’s likely out of retirement to form the toward consumption. One door to strengthen the US dollar. Fidelity China Special Situations closes and another opens. That in turn, he says, is going fund – only to see the share to unsettle emerging economies plummet far below the issue And the After-Effects? that have been taking on dollar- price, as some portfolio stock It was time to ask the difficult denominated debt – because picks were hit by scandal and a question. Are we likely to see the it’ll cost them more to repay

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those loans if their currencies And yes, differences of itself tells us very little about the have dropped against the opinion do arise. Aberdeen, relationship between the financial greenback. Indeed, they may which runs 45% of the Witan markets and the underlying find themselves short of dollars, Pacific portfolio, has really economy, the latter of which is which would place them in very little exposure to China, still barrelling along at 5% or a very awkward position. whereas Matthews for instance, more even at the most pessimistic holds quite a bit. Once again, the estimates. There has certainly Geographical Allocation advantage of the multi-manager been a problem in the recent So let’s look at the Witan Pacific approach comes to the fore, past with the market engaging Investment Trust portfolio. The with each manager following in excessive leveraging against fund is roughly 11% in China what he’s comfortable with. the country’s true growth rates, and 14% in Hong Kong – but And the Future? but this year’s painful correction with no direct A share exposure should have taken the wind out in Shanghai. Instead, it’s all held And so to the future. As we went of that particular balloon. With through the H shares market to press, the Chinese financial prospective p/e ratios back down which is quoted in Hong Kong – markets (and Hong Kong too) to sensible levels, the time for a and which was insulated to some were still noticeably twitchy re-entry may not be too far away. extent from both the high rises about the developing situation in and the steep falls in Shanghai. the country – partly, it must be But the more important thing It’s particularly important said, because of the temporary to remember is that the Witan to retain a regionally diversified uncertainty in the States but Pacific Investment Trust is very portfolio in this instance, says partly also because it was felt much a more diversified creature Bell. But he cautions against that the Chinese leadership had than the headline stories might simply determining an allocation not played a perfectly acceptable suggest. Yes, there are concerns for a particular market – rather, hand very well. The abandoned about a ripple-out effect in the he says, it’s essential to give attempt to support first the stock region, which of course counts the managers in each instance market and then the renminbi the People’s Republic among the dynamic freedom to follow had caused more concern than the its prime trading partners, but stock-specific opportunities as 40% fall in equity values itself. it’s at times like these that the they arise. That’s something And yet, as Bell is quite diversification of a multi-manager you won’t get from a tracker. correctly pointing out, this in approach comes to the fore.

Witan Investment Trust plc – Discrete Performance Discrete Q3 2010 – Q3 2011 – Q3 2012 – Q3 2013 – Q3 2014 – Performance† Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015

Share Price (Total Return) -7.1% 18.6% 30.4% 16.0% 5.9%

Net Asset Value** (Total Return) -8.4% 18.1% 27.1% 8.8% 2.9%

Benchmark* (Total Return) -5.6% 15.9% 19.8% 8.1% -0.7%

†Source: Datastream & FE Analytics, percentage growth to 30.09.15. Total return includes the notional investment of dividends. *The benchmark is a composite of 40% FTSE All-Share/20% FTSE All-World North America/20% FTSE All-World Europe (ex UK)/20% FTSE All-World Asia Pacific. Source: FTSE International Limited (“FTSE”). FTSE is a trademark of the London Stock Exchange Group companies and is used by the FTSE under license. For more information go to http://www.witan.com/legal-information. **The Net Asset Value figures value debt at market value. Witan Pacific Investment Trust plc – Discrete Performance Discrete Q3 2010 – Q3 2011 – Q3 2012 – Q3 2013 – Q3 2014 – Performance† Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015

Share Price (Total Return) -3.6% 11.8% 18.2% 0.1% -3.3%

Net Asset Value (Total Return) -7.8% 13.6% 10.3% 3.2% -3.2%

Benchmark* (Total Return) -6.8% 7.6% 15.8% 3.9% -3.0%

†Source: Datastream, percentage growth to 30.09.15. Total return includes the notional investment of dividends. *The benchmark for the Witan Pacific Investment Trust PLC is the MSCI AC Asia Pacific Free Index (£)

This supplement is sponsored by Witan Investment Services. Investments Investment trusts and closed-ended funds are allowed to borrow. This is and or investment strategies referred to in the document may not known as ‘gearing’. In a rising market, it will tend to enhance returns because be suitable or appropriate for all recipients. It is your responsibility to of the investment fund’s increased exposure to the market. By the same seek investment advice before making an investment decision. token, however, it will tend to increase losses triggered by a falling market and a sufficiently large fall in value could mean you get nothing back at This supplement contains marketing communications issued and approved by all. Funds may, however, increase or decrease their levels of gearing to suit Witan Investment Services Limited for information purposes only and does not market conditions. Since 28th March 2014, is has been the Company’s constitute a solicitation or a personal recommendation in any jurisdiction. policy for Witan Pacific Investment Trust not to employ gearing. For a full overview of each Trust’s performance please visit www.witan.com Any reference to individual securities does not constitute a recommendation for Witan Investment Trust plc and www.witanpacific.com for Witan Pacific to purchase, sell or hold the investment. No reliance may be placed for any Investment Trust plc. purpose on the information and opinions contained in the presentations or Please remember past performance is not a guide to future their accuracy or completeness. No part of this material may be copied, performance and the value of an investment and the income from it photocopied or duplicated in any form or distributed to any person can fall as well as rise as a result of currency and market fluctuations that is not an employee, officer, director or authorized agent of the and you may not get back the amount originally invested. recipient, without Witan Investment Services Limited’s prior permission.

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Witan - Pacific Trust.indd 19 26/11/2015 14:08 “Anyone can hold the helm when the sea is calm.” Publilius Syrus (100 BC)

When markets are volatile, you need a steady hand on the tiller. Witan’s multi-manager approach could offer you a smoother course through choppy waters.

Witan is the only fully multi-managed, global equity investment trust. Which offers you a double benefit - we’re constantly striving to perform better than global equity markets and deliver a growing income - and by virtue of being a multi-managed fund we aim to smooth out the volatility associated with a single manager.

At Witan, we hope many years of plain sailing await you. Anchors aweigh! Contact us today, to find out more.

Visit www.witan.com Call 0800 082 81 80

Issued and approved by Witan Investment Services Limited. Witan Investment Services Limited is registered in England no. 5272533 of 14 Queen Anne’s Gate, London SW1H 9AA. Witan Investment Services Limited provides investment products and services and is authorised and regulated by the Financial Conduct Authority. Calls may be recorded for our mutual protection and to improve customer service. Please see the disclaimer at the end of this supplement

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