Witan made a 22.9% return on net assets over the year ended 31 December 29016, more or less matching the 123.0% return posted by its benchmark. The underlying managers struggled with just three of their ten third party managers, together with the direct holdings portfolio, outperforming their benchmarks. There were significant positive contributions from the use of gearing and from share buybacks. The share price total return was 18.4 %, as the share price moved from a 0.2% discount at the end of 2015 to a 4.0 % discount at the end of 2016. The dividend for the year has been increased by 11.8 % to 19.0 pence per share (2015: 17.0 pence).
In October 2016, Witan repaid its 8.5% Debenture, originally issued in 1986. This redemption, together with the low cost debt issued in 2015, significantly reduced the average cost of the fixed borrowings from 7% prior to the 2015 issue to 4.6%.
The manager’s report says that Pzena and Tweedy, Browne had the strongest performance of Witan’s five global managers, benefiting from a broadening of investor interest to areas favoured by value managers. Pzena’s return of 32.7% outperformed its global equity benchmark by 3.1%, with Tweedy, Browne outperforming by 0.4% with a return of 30.0%. Lansdowne (with a return of 14.4%) had a relatively weak year, underperforming significantly during the first half of the year although performance was in line with the global equity index in the second half of the year. In the UK, Heronbridge outperformed the UK market by 0.7% with a return of 17.5%. However, Artemis and Lindsell Train materially lagged the UK market, after four years of significant outperformance. Similarly, European manager, Marathon, underperformed its European benchmark, which was itself weak relative to other global equity regions.
They note that the longer-term performance of all the managers who lagged in 2016 remains ahead of their benchmarks while those who had lagged in 2015 outperformed in 2016. In 2016, the Direct Holdings portfolio was 11.5% ahead of Witan’s composite benchmark with a return of 34.4%. This portfolio held 8.7% of assets at the previous year end and represented 10.2% of the investment portfolio at the end of 2016. The largest holding, in SVG Capital, was sold following the bid for the Company in September. The holding in BlackRock World Mining delivered a total return of close to 100% during 2016, moving the position from loss to a significant profit. They added to the holding in Aberforth Geared Income Trust following post-referendum weakness in UK small and midcap companies. They also made a new investment in the Somerset Emerging Markets Small Cap fund when emerging market sentiment was depressed in January 2016 and late in the year, they made an investment in Syncona (formerly called BACIT Limited) following the change in its investment objective to specialist life sciences investment.
WTAN : Witan matches benchmark in 2016