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Will chasing higher alpha save Witan Pacific?

by Sarah Miloudi on May 09, 2012 at 08:21

Will chasing higher alpha save Witan Pacific?

Witan Pacific has had many guises over the years.

Formerly F&C Pacific, the £153.7 million Asia trust adopted a multi-manager approach in 2005 when its mandate was split between Aberdeen and Japan specialist Nomura.

Although adopting a multi-manager approach has done Witan Pacific no harm - over three years it has grown its portfolio 39% versus 25% by its comparator index - the trust could do better, and it is hoped that by handing over its Nomura mandate to MW GaveKal, which will run 10% of the funds, and Matthews, which will run 35%, investors will be opened up to a wider spectrum of opportunities and better returns as a result.

Will chasing higher alpha help?

Switching Nomura for Matthews and MW GaveKal - the joint venture of hedge fund Marshall Wade and GaveKal, the Asia-based consultancy, took effect at the end of month and so far it is a move that has been tentatively welcomed.

'These management changes appear sensible in our opinion,' said the investment companies team at Winterfloods, which pointed out that Andrew Bell has introduced a similar strategy at the vehicle's global multi manager sister, Witan.

Under the changes, Witan Pacific's portfolio will become more concentrated, with the number of positions halved closer to 100, and its exposure tweaked to overweight greater China and its underweight to Japan reduced.

Matthews' Jonathan Schuman said that in its section of the portfolio there is likely to be a bias toward small and mid cap bets, along with a focus on income and finding the dividend stars of tomorrow rather than just the best performers of today.

'We anchor the portfolio in companies paying stable dividends and compliment them with companies paying more modest dividends but with attractive growth prospects,' Schuman explained.

'We tend to favour small and mid caps relative to most equity income strategies and, at a sector level, we tend to favour consumer facing businesses from consumer staples and discretionary to healthcare,' he added.

But by pursuing a higher alpha, bottom-up strategy versus Nomura's, which was dictated by the investment bank's macro views, what will really change for Witan Pacific, which according to Citywire data sits almost 20% behind its nearest competitor in NAV terms and at the middle of the closed-end Asia (inc Japan) league?

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