By Jonathan Jones, Editor, Trustnet, 26 June 2024:
Alliance Trust and Witan are to join together in the biggest investment trust merger in history and create the industry’s sixth-largest investment company with around £5bn in assets under management.
The announcement, made this morning, comes after Witan had previously announced a strategic review of the £1.6bn trust, brought about by the impending retirement of chief executive officer Andrew Bell.
Alliance Trust’s investment manager, Willis Tower Watson, will manage the combined entity, which will be rebranded as Alliance Witan. Its investment process will be the same as the current £3.4bn Alliance Trust strategy, with different fund managers investing in 10-20 stocks.
The merger will propel the investment trust up the UK market in terms of its size and could potentially mean it is large enough to be included in the FTSE 100..
Witan’s shareholders could also benefit from markedly improved performance. Indeed, Alliance Trust has beaten Witan over one, three five and 10 years, with the former trouncing the latter by more than 100 percentage points over the decade, as the below chart shows.
Andrew Courtney, an analyst at QuotedData, suggested a key part of the decision to merge with Alliance Trust may well have been performance.
“[It] is likely in response to Witan’s ongoing poor performance with the trust one of the sector’s worst performers over the past 10 years,” he said.
“The deal with Alliance appears to be a good fit on first blush, given the similarities of the two funds – both are large global funds with multi-manager approaches – and is certainly a positive for both in our view given the benefits of increased efficiency that the combination will bring.”
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