Witan Pacific underperforms again – Over the year ended 31 January 2020, Witan Pacific returned 5.2% in NAV terms, 3.5% less than the return on its benchmark (the MSCI Asia Pacific Free Index). Fortunately for shareholders, a narrowing of the discount left them with returns of 12.3%. The dividend was increased from 7p to 7.15p. This was just covered by earnings. Since the inception of the strategy on 31 May 2005, the NAV return has been 236.2% against a 243.0% return from the benchmark.
Aberdeen outperformed the benchmark whereas disappointingly the other three managers underperformed.
|wdt_ID||Manager||Appointed||AUM £m/%||Manager return||Benchmark return|
|1||Matthews||30/04/12||88 / 39.6||+2.4||+8.7|
|2||Aberdeen||31/5/05||58.5 / 26.4||+14.7||+8.7|
|3||Robeco||28/09/17||55.0 / 24.8||+4.5||+8.7|
|4||Dalton||28/09/17||20.4 / 9.2||+4.3||+8.7|
Last year, the board promised a full exit opportunity at a price close to NAV if the trust didn’t beat its benchmark over the two years ending 31 January 2021.
Extract from the manager’s report
“It was another frustrating year for the majority of Witan Pacific’s managers as the environment outlined in the Chair’s statement was ill-suited to their current portfolio positioning. Three of the four managers underperformed the benchmark, with Aberdeen being the sole positive contributor to relative returns. Aberdeen’s focus on the best quality companies was well placed to benefit in an uncertain environment for Asian markets. These companies, with strong franchises, solid balance sheets and healthy cash flows, were favoured over the more cyclical or consumer focused stocks owned elsewhere in the portfolio. Aberdeen’s total return of 14.7% was solidly ahead of the benchmark’s total return of 8.7%. Matthews gave up a significant degree of the outperformance since appointment as retail, resources and automobile stocks were key detractors from returns as was their exposure to the Chinese consumer. A total return of 2.4% was a disappointing result from a manager whose long-term record has served Witan Pacific well. Robeco’s investment style made up some ground in the final quarter as value stocks came back into favour, but not by enough to overcome the relative underperformance they had suffered in the first half of the year. Their portfolio ended the year 4.2% behind the benchmark. Dalton enjoyed some significant successes this year including owning two of the region’s best performing companies; GDS Holdings (a Chinese data centre operator) and Shin Zu Shing (a Taiwanese manufacturer of precision hinges for technology applications). Unfortunately, these gains were largely offset by losses elsewhere resulting in a portfolio return of 4.3%. Over the longer-term, Aberdeen has produced annualised returns of 10.6% compared with the 8.8% achieved by the benchmark since 2005 and Matthews is up 10.1% (annualised) versus 9.4% for the benchmark since their appointment in 2012. Robeco and Dalton are both behind benchmark since appointment in 2017.
In terms of individual stock contribution to returns, the Company’s largest position, Taiwan Semiconductor Manufacturing Company, made the greatest contribution. Indeed, technology and high-precision industries were well represented in the list of contributors over the year with Samsung Electronics, Hoya Corporation (electro-optical products), Shin Zu Shing, Shin-Etsu Chemical (semiconductor silicon), MediaTek (semiconductor manufacturer) all making significant contributions. Other successes included Breville, the Australian kitchen appliance manufacturer and Chugai Pharmaceutical in Japan. On the negative side were China Petroleum & Chemical Corp (SINOPEC), China Mobile, Seven & I (Japanese convenience retail), China Resources Power,
Turquoise Hill Resources (copper mines) and LG Chemical (industrial petrochemicals and plastics).
Japan makes up the largest single country allocation of our portfolio. Despite this, it remains the largest underweight position relative to the benchmark. Being underweight Japan was a headwind for performance as the Tokyo stock market outperformed its emerging market counterparts. The portfolio was also held back by owning certain Japanese stocks which were particularly exposed to the fortunes of the Chinese consumer. The ebb and flow of US/China trade negotiations was a key influence on Asian equity sentiment throughout the year and was not particularly helpful to manager performance.”
WPC : Witan Pacific underperforms again