Witan shakes up £1.3bn fund

WITAN TRUST today succumbed to shareholder anger as it announced a big shake up in the management of its £1.35bn funds.

Witan has 55,000 investors and has been around since 1909, making it one of the biggest, oldest and most popular investment trusts in the UK. But investors are angry at its underperformance - the share price is down 30% since 2001, which is twice the average loss of rivals in recent years.

Today Witan said there will now be six companies running the fund rather than just one. They are: MFS Investment Management and Southeastern Investment Management investing globally, Wellington Management for continental Europe, Brandes Investment Management for Japan and APS Asset Management for the Pacific Basin.

Henderson Global Investors, which has managed the entire fund since its inception, will continue to manage the UK and US portions of it.

There has also been a change to the way that the managers are paid. They will receive a low basic fee plus bonuses for out-performance. This lowers the cost base of the fund from 0.30% to 0.16%.This will rise to up to 0.30% if the managers outperform, but fees are capped.

Chief executive James Horsburgh emphasised: 'These kind of rates are very competitive in an institutional sphere; for retail they are mind-boggling.'

The fund has also decided on a two-pronged approach in terms of risk. Henderson operate like an index tracker but will be expected to supplement returns with good investment ideas. The new managers will be picking stocks with good growth and value, and largely ignoring the benchmarks.

However, Witan's decision to retain Henderson has surprised some City insiders. 'It certainly looks a little too cosy,' said Roddy Kohn, managing director of financial advisers Kohn Cougar.

Horsburgh however, insists he cherry-picked the best performing parts of Henderson, as some of its products were the best available.

In contrast to the AGM statement in March, Witan has decided against investing in other areas. 'Property is too cumbersome, I can envisage no scenario in which bonds will outperform in the near future and there is no advantage to private equity over listed equity,' said Horsburgh. 'As for hedge funds, we found we were able to achieve our desired risk/reward profile with funds using traditional stock-picking methods without having to pay the high fees that hedge funds charge.'

Although most agree the changes are for the better, Mark Dampier, IFA at brokerage firm Hargreaves Lansdown, feels Witan has given too much thought to the cost issue. 'I don‘t understand why they haven‘t gone for active managers across the board.' he said. 'If the markets here and in the US continue going sideways, the only way of making good returns is by beating the index.'

Roddy Kohn agreed: 'Talking about price isn‘t really the point. What really matters is performance. Larger investors won‘t be taken in by this.'