by Dave Baxter, Investors Chronicle, June 26, 2024:
Two popular global stocks investment trusts are to create a £5bn behemoth after Alliance Trust (ATST) announced it would take over its weaker-performing rival, Witan (WTAN).
Both trusts invest with a global mandate and use a multi-manager approach, employing other fund houses and investment firms to pick their stocks and implement the strategy.
The tie-up, subject to shareholder approval, would see the £1.8bn Witan portfolio rolled into ATST under the new banner of Alliance Witan. The new trust would stick with Alliance Trust’s current model of allocating capital to a handful of stockpickers with different styles and regional specialisms who pick between 10 and 20 of their best ideas.
Much as it does bring together two of the investment trust sector’s oldest and biggest names, the combination is unsurprising. Alliance Trust, which adopted its current approach after a bruising tussle with an activist investor in 2015, has navigated market rotations well in recent years due to employing a range of managers who use different investment styles.
ATST shareholders took less of a hit during the 2022 sell-off compared with the MSCI World index and the average trust in the AIC’s Global sector. The trust even managed to outperform the global equity index during the AI-fuelled frenzy of 2023. On a five-year view, ATST shareholders are not far behind the MSCI World index.
However, Witan has long struggled against rival trusts and the broader stock market despite also using a multi-manager approach. Earlier this year, Investec analysts Alan Brierley and Ben Newell levelled savage criticism at the fund, pointing to a “catalogue of poor investment decisions” made by the trust over time, from holdings doing poorly to badly timed investments.
QuotedData analyst Andrew Courtney said the tie-up was “not an unexpected move” in light of Andrew Bell’s retirement and Witan’s poor performance, adding that it was “a good fit, given the similarities of the two funds”. The merger would also create a larger, more liquid vehicle just as trusts need even greater scale to remain viable.
Read more here