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Witan splashes cash in bid to regain premium status
Global investment trust buys back shares for first time in over a year as it seeks to regain premium rating lost amid the market falls.
Global investment trust Witan (WTAN ) has been buying up shares in a bid to regain the premium rating lost as the market falls since the turn of the year took hold.
Witan has so far this year spent £1.4 million on its shares as they have fallen to a discount, having traded at a small premium or at par to net asset value (NAV) throughout most of 2015.
That marks a stark contrast to last year, when the trust didn't buy back any, and instead raised £83 million through the issuance of new shares.
Buying back shares or issuing new ones is a tool available to investment trust boards to control the discount or premium to NAV at which the shares trade. Broadly, when the shares are trading at a premium, boards may issue new shares in order to rein that in, while buy-backs help to reduce discounts by boosting the value of the remaining shares.
Witan is not the only investment trust to have seen its premium rating disappear. Sliding markets have also taken their toll on fellow global funds Scottish Mortgage (SMT ) and Majedie (MAJE ), whose shares have fallen from their normal premium. Shares in UK equity income stalwart City of London (CTY ) also appear to have lost their lustre, trading at a rare discount.
But Witan's case appears the most pronounced, with the shares having slid to a 7.3% discount that makes it the 'cheapest' investment trust according to Numis Securities' Z-score measure.
Charles Cade, analyst at Numis, said the discount on the trust's shares presented an attractive opportunity. 'We believe that Witan's board and management remain committed to protecting the discount and, in our view, the recent widening presents an attractive opportunity for long-term investors to buy into a well-managed global equity portfolio,' he said.
In its full-year results, stretched its record of consecutive increases in the dividend to 42 years, with a fourth interim dividend of 5.45p that takes 2015's payment to 17p, up by more than 10% on 2014's 15.4p payout.
That brings it level with Murray Income (MUT ), with only eight investment trusts boasting longer track records of raising dividends.
The trust delivered a 5.7% total return on its shares throughout 2015, although they have slumped 8.3% so far this year amid the market falls and widening discount.
Witan delegates much of the management of its portfolio to other fund managers, and in 2015 eight of the 11 they employ outperformed their benchmarks. Lansdowne Partners delivered a particularly strong 17.1% return, while Lindsell Train returned 7.7%, dividend-focused Asia investors Matthews delivered 10.1% and European investors Marathon posted a 10.7% performance.
But the portfolio was hit by a 10.7% drop in the portion run by emerging markets-focused Trilogy, and while Tweedy Brown scraped a 0.5% return that was below the 4% delivered by global markets as the manager's value style suffered.
'2015 was a "glass half-empty" year in market sentiment terms, with a propensity to magnify disappointments and to dismiss positive news as already priced in, or about to turn bad,' said Witan chief executive Andrew Bell.
'It seems unlikely that the world will see rapid rates of economic growth in 2016 but nor does it appear probable there will be renewed slippage into recession. Finding companies which can grow their earnings in a world of moderate growth will continue to be the focus of our managers.'
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In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
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- Witan (Ordinary Share)
- Scottish Mortgage (Ordinary Share)
- Majedie Investments (Ordinary Share)
- City of London (Ordinary Share)
- Murray Income Trust (Ordinary Share)
- Foreign & Colonial Investment Trust (Ordinary Share)
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by Daniel Grote on Mar 27, 2017 at 16:03