Analyst urges big changes at underperforming £1.7bn trust

The trust, which invests in other funds, has underperformed relative to its benchmark for five of the past six years. 

In a note to clients, shared with FT Adviser, Brierley said the share price performance of the trust has been boosted by the board buying back about 8 per cent of the fund’s shares each year.

But he said buybacks were supposed to be a temporary measure to deal with short-term factors, not a long-term strategy.

Brierley added: "The reality is that the underperformance of Witan is such that there are a lot of investors looking to sell their shares, and not a lot of buyers looking to buy them.

"So the trust has been acting as the buyer, and over the past five years has bought back 29 per cent of its own shares. But ultimately, serial buybacks are not the answer and there comes a time when a more creative solution is required.”

Brierley said the reason the trust has underperformed was a combination of being in the wrong markets at the wrong time.

For example, he said: “They went into growth [funds] at the end of 2020, which is the exact time when those funds had peaked. And they stuck with quite a large UK exposure which hasn’t worked.

"But also at the fund level, some of the funds they picked haven’t worked out either. It has been a bit of a perfect storm.”

The chart below, showed Witan had the second larget exposure to UK equities among its peer group in the AIC Global sector. 

A significant fund exposure is to a mandate run by Nick Train, whose growth style of investing has been deeply out of favour with the wider market in recent years. 

Brierley compared the performance of Witan with that of Alliance Trust, another global equity multi-manager fund, and said Witan has underperformed this rival by an average of 3.5 per cent a year each year since 2017.  

A representative of the Witan investment trust was unavailable for comment.  

david.thorpe@ft.com