It will be quite the month for investment fund Alliance Witan. This week it will join the FTSE 100, becoming one of just nine stock market-listed investment trusts on the elite index.
‘It’s great news,’ says Craig Baker, its investment committee chairman. ‘It will bring the fund to the attention of more investors, more wealth managers and those investment vehicles that track the performance of the FTSE100 Index. These trackers will need to buy the trust’s shares.’
The greater demand, he says, should help the share price trade at close to the value of its underlying assets. Its shares now sit at a 3 per cent discount, lower than the industry average of 13 per cent.
‘You never know,’ adds Baker. ‘We might get to the stage when demand for the shares is so strong that we can issue new ones to grow the trust’s assets even more. How great that would be.’
The trust’s elevation to the FTSE100 is due to the merger of two funds – Alliance and Witan – although it’s more akin to a take-over with Witan’s assets being absorbed into Alliance.
The investment infrastructure that will oversee the combined trust, capitalised at £5 billion, is what was already in situ at Alliance. This means the investment team at Willis Tower Watson (WSW) – which parcelled out Alliance’s assets to what it considered best-in-class managers from around the world – will continue to do so for Alliance Witan.
The combining of the two trusts’ assets was made easier by the fact Witan adopted a similar ‘parcelling’ investment approach. The result is 11 fund managers looking after the trust’s £5.5 billion in assets.
A few odds and ends inherited from Witan – including six investment trust holdings – will be disposed of in the future when (and if) their prices recover.
The portfolio that results from the blending of all the individual portfolios run by the external managers is 226-stock strong. Yet there are familiar tech names among its biggest holdings.
These include Amazon, Microsoft and Nvidia – members of the ‘magnificent seven’ US stocks, responsible for driving the US stock market ever higher.
Baker says although the trust has more than 60 per cent of its assets in North American-listed stocks and over a fifth of its stocks are classified as IT (tech), it remains ‘diversified across regions, sectors, and investment styles’.
For example, its exposure to Asia and emerging markets – primarily via a portfolio run by an emerging markets team at GQG Partners – is just below 15 per cent. One benefit of the merger is that the charges for running it – which denude returns for shareholders – should fall. Now standing at 0.62 per cent, Baker says they should come down to below 0.6 per cent.
Alliance Witan sees itself as a solid core portfolio holding, a view that it reinforces with advertising on radio and television.
Its performance numbers back this up. Over the past one, five and ten years, the trust has delivered respective returns of 17.5, 66.7 and 232.3 per cent. To put these numbers into perspective, its global trust peer group has delivered average returns over these three time periods of 17.9, 57.8 and 232.3 per cent.
Dividends (paid quarterly) are modest, equivalent to an annual yield of just over two per cent. But the combined trust is unlikely to deviate from the path that both Alliance and Witan both pursued as independent funds, growing the annual dividend every year through thick and thin.
The market ticker is ALW, and the stock market identification code is B11V7W9.
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