Alliance Trust completes its merger with Witan

One of the best-sellers on Fidelity Personal Investing in September was the Alliance Trust, with clients taking the opportunity to get on board ahead of the merger with rival Witan. This process has now been completed and the combined entity renamed Alliance Witan, a new vehicle that benefits from a sizeable £5bn of assets under management.

The merger was triggered by the retirement of Andrew Bell, the longstanding CEO of Witan who was responsible for bringing in the multi-manager strategy, so it was an obvious solution given that both trusts followed the same approach. It looks like the deal went well as there was only a short transition period, with the new portfolio now fully invested.

Objective and approach

Alliance Witan aims to deliver long-term capital growth and a rising level of income by investing in global equities at a competitive cost. The firm responsible for the decisions is Willis Towers Watson (WTW), which blends the top stock selections of some of the world’s best active managers into a single, diversified portfolio that is designed to outperform the market.

WTW has split the £5bn of assets into 12 different mandates, with each of the responsible companies contributing a concentrated portfolio of 10-20 of their best ideas. The aim of the process is that the relative performance should mainly be driven by stock selection, hence the high active share of 77%, which measures how much the holdings differ to the index.¹

The new portfolio

It is an interesting portfolio that includes both developed and emerging markets, albeit with similar aggregate weightings to the benchmark in terms of the regions, sectors and styles. The underlying managers are not normally accessible by retail investors, so the names are unlikely to be familiar, although they include both growth and value specialists.

There were two new mandates added during the transition, the first of which was EdgePoint, an employee-owned business based in Toronto that seeks to buy good, undervalued companies and hold them until the market fully realises their potential. The other was the growth manager Jennison Associates.

Business as usual

Craig Baker, Chief Investment Officer of WTW and Chair of the Alliance Witan Investment Committee, says that now that Witan’s assets are fully invested, it is business as usual.

“We will be using the same proven investment approach we have always used for Alliance Witan, although we will be retaining a small number of Witan’s discounted investment trust holdings, which represent less than 3% of the portfolio, until such time that they can be sold at an attractive price for shareholders.”²

Performance, discount and costs

Over the 5 years to the end of September, Alliance Trust generated a total shareholder return of 65.7%, which was marginally ahead of the 63.3% produced by its MSCI ACWI benchmark. The discount to NAV is just over 5% and is typical of the level that it tends to trade at.³

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. The shares in this investment trust are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. Overseas investments will be affected by movements in currency exchange rates. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of  Fidelity’s advisers or an authorised financial adviser of your choice.