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Witan IT faces ‘uphill struggle’

Biotech trusts top performance charts in February

Witan IT faces ‘uphill struggle’ as managers lose ‘Midas touch’
By David Brenchley, Investment Week, 15 June 2020

Witan Investment Trust faces “an uphill struggle to repair the material damage inflicted upon what is a strong brand”, according to one broker, as analysts weigh up the 111-year-old trust’s prospects after its managers admitted they may have been “afflicted with a reverse Midas touch”.

A prolonged period of “unusually poor performance” forced managers Andrew Bell and James Hart to apologise to investors and to overhaul the global multi-manager trust’s underlying mandates…

The pair said Witan would step up its level of share buybacks to combat volatile discounts, while assuring investors it would draw on its revenue reserves, if needed, in order to “extend its record of 45 consecutive years of dividend rises”…

Some analysts are worried for Witan. Investec’s Alan Brierley said he had been “surprised by the magnitude of [recent] underperformance”, which has “almost wiped out a decade of outperformance”…

Brierley also questioned “the company’s passion for composite benchmarks”. Its benchmark’s UK weighting of 19%, for instance, is still well above the FTSE All-World’s 4.4%…

Witan’s UK overweight, said James Carthew, head of investment company research at QuotedData, came from a long held view UK-based investors would be comfortable with an overweight exposure to the UK on risk grounds. “This may have been true in the past but it is not today,” Carthew countered.

“The other asset allocation decision that Witan got wrong was an underweight exposure to technology and other high-growth sectors. It is not obvious to me that this has been rectified by the changes that have been announced to date. This may, in the long term, be a bigger mistake.”

J.P. Morgan Cazenove’s Brown has an ‘overweight’ rating, explaining: “With our strategists calling for a shorter term bounce in cyclicals now does not seem like the time to give up on Witan, particularly given the recent widening of the discount.”

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