Alliance Witan Trust: April 2025 investment trust update

• In October 2024 Alliance Trust merged with Witan Investment trust to create Alliance Witan.

• Willis Towers Watson hunt for what they believe to be the best stock pickers and blend them together in this trust

• The trust’s impressive dividend record continued after increasing for the 58th consecutive year. Income is variable and not guaranteed.

How it fits in a portfolio

Alliance Witan Trust aims to grow an investment and provide a rising income over the long term by investing in companies from around the globe. Larger companies from developed markets are the primary focus but it also invests in higher-risk smaller companies and emerging markets.

Historically, the trust invested in a range of different assets alongside company shares, such as bonds, mineral rights, and private equity. Today it adopts a multi-manager approach, which means portions of the trust are run by different fund managers, and it’s solely focused on shares. This means there's plenty of diversification on offer. The trust could be used for income or to bring international diversification to a UK-orientated portfolio.

Manager

This trust is managed by 11 fund managers, most of which are not accessible for individual UK investors. Each manager creates a portfolio of approximately 20 companies, from wherever in the world they choose. They each have their own strengths, styles and areas of focus which are carefully blended together to create a diversified investment trust.

The managers are selected by the Investment Committee at Willis Towers Watson. The Committee is chaired by Craig Baker, Global Chief Investment Officer, who is supported by co-managers Stuart Gray and Mark Davis. The team can also tap into the expertise of around 130 analysts and portfolio managers from across the globe.

Process

The Investment Committee believes that the majority of stock pickers outperform with their highest conviction investments but hold back returns with their smaller holdings. That’s why they only let most of their underlying managers invest in their 20 best ideas. This number is big enough to spread risk and is also a manageable number of companies to keep on top of.

To whittle down a universe of over 1,600 managers globally, the team conduct detailed analysis to ensure they meet their criteria. Managers must possess a competitive advantage and be able to maintain this edge and continue to do well over the long term. The most important aspect is the people themselves. That’s why they spend a great deal of time understanding their motivations, experience, and who’s influenced them throughout their careers. The team also consider how these managers are aligned with their investors, whether that be through equity in the business they work for or a significant co-investment.

Information is widely available so it’s critical for them to understand how these managers are synthesising it better than others. Whilst the number crunching and length of their track record is important, their judgement is largely made through their qualitative work. Their dominant market position means they get great access to meeting stock pickers, their research and are able to sit in on company meetings. This work is ongoing, and they will meet with managers numerous times before taking a view.

Currently they have 11 different managers whom the Investment Committee blend together in the trust, ensuring there isn't too much risk at a company, sector, or geographical level. They also want to maintain a balanced portfolio in terms of investment styles.

North America accounts for 62.6% of the trust making it the largest country allocation, although this is less than the benchmark. In contrast, they invest more in Europe and the UK. Sector-wise, the managers find most opportunities within technology, financials and consumer discretionary.

In the past financial year, the trust made a number of changes to the underlying managers. After Jupiter Global value manager Ben Whitmore announced he was leaving Jupiter, the trust decided to sell Jupiter and instead invest with ARGA. Similar to Jupiter, ARGA focus on global companies that they believe to be undervalued and are trading below their true value. This is known as value investing.

Following the merger with Witan they were also able to add Jennison as a manger. Jennison specialise in investing in fast-growing businesses and was previously one of Witan’s best performing managers. The final change was replacing Black Creek after a series of senior team changes including uncertainty around the retirement of Black Creek’s founder. They were replaced with EdgePoint who like Black Creek also have a value investing style.

Some of the managers invest in smaller companies, emerging markets or use derivatives to help them invest, which all increase risk. The trust uses gearing (borrowing to invest) to try to boost returns. Gearing at the end of December was 8.4% an increase from 7.1% the previous year. Gearing can also increase losses though, so it’s a higher-risk approach.

Culture

Alliance Trust was founded in 1888 and in October 2024 Alliance trust merged with Witan Investment trust to create Alliance Witan. The result meant several changes to the board of directors however, Dean Buckly remains chair. There have been no changes to the process or philosophy following the merger, just a larger pool of assets for Willis Towers Watson (WTW), to manage. Previously the trust was a constituent of the FTSE 250 however, following the merger they have been promoted to the FTSE 100.

WTW is a large consultancy firm with over 45,000 employees across 140 countries. This is the first investment trust they’ve managed but WTW has invested this way for much longer on behalf of institutional clients. When selecting managers, they pay close attention to the underlying culture, alignment, and operational resource of the firms they work for.

ESG Integration

Although not an ESG trust, WTW ensure the underlying managers must have a demonstrable framework in place to identify and monitor environmental, social and governance (ESG) factors for the companies they invest in.

WTW allow the managers to manage this risk as they see appropriate as long as there is a suitable framework in place. In 2021, the board also set a target of net zero greenhouse gas emissions from the trust by 2050. Each asset manager that the trust uses must have also set a net zero target.

Cost

The net ongoing annual charge is 0.56% this is lower than the 0.62% the previous year. Investors should refer to the latest annual reports and accounts, and Key Information Document for details of the risks and charging structure. If held in a SIPP or ISA, the HL platform charge of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. The platform charge doesn’t apply if the trust is held in a Fund and Share Account.

Investment trusts trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges within any Hargreaves Lansdown account, except online in the HL Junior ISA.

Performance

Since WTW was appointed as manager in April 2017, the trust has underperformed it’s benchmark the MSCI All Country World Index. The trust’s share price has risen 99.79%* compared to 117.46% of the benchmark. However, they have outperformed the average trust in the AIC Global sector which returned 76.20%. Over the time the trust’s Net Asset Value (NAV) increased 99.34% Remember past performance is not a guide to the future.

Over the trust’s last financial year to the end of 2024, the trust underperformed the MSCI All Country World Index. The trust’s share price has risen 14.31% compared to 20.13% of the benchmark. Thet also underperformed the average trust in the AIC global sector which returned 16.30%. Over this time the trust’s NAV increased 13.34%.

Given the trust blends a number of managers together, it’s expected that the different managers will perform differently. The best three performing managers were Sands Capital, Vulcan Value Partners and Lyrical Asset Management. Sands best performing stock was US industrial business Axon enterprise who create tasers and body cameras. Vulcan, who have a value focussed style, had success with US private equity firm KRR. Lyrical who also focus on investing in undervalued companies did well with their investment in energy company NRD energy as well as online marketplace eBay.

On the other hand, Sustainable Growth Advisors (SGA), Metropolis and ARGA didn’t perform as well. Despite SGA’s growth style of investing being mostly in favour in 2024 a number of the companies they owned struggled. This includes European healthcare company Novo Nordisk, US technology company Synopsis and US healthcare company ICON. Metropolis and ARGA are more value focused investors and their style was typically out of favour in 2024.

The total dividend per share for the year to 31 December 2024 was 26.7p a 6% increase from 25.2p the previous 12-month period. This trust is an AIC ‘dividend hero’ having increased its dividend for the 58th year in a row. The trust has a dividend yield of 2.29%, although remember yields are variable and aren’t a reliable indicator of future income. At the time of writing the trust trades on a -5.96% discount and over the last 12 months the trust traded on a discount of -4.50%. Since WTW took over running the trust in April 2017 the trust has traded on average at a -5.49% discount.

Performance pre-merger is in relation to Alliance Trust.