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Witan Investment Trust reported an 11% increase in net asset value (NAV) for the first half of 2024, reflecting the trust's exposure to leading UK Financial sector companies. Despite this, the trust slightly underperformed its composite global benchmark during the period ending June 30, 2024. The increase in NAV underscores the positive impact of Witan’s diversified portfolio within the investment trust sector.
However, the trust's performance faced challenges due to its investments in the GMO Climate Change Investment Fund, as well as ongoing political uncertainties in parts of Europe and the forthcoming US presidential elections.
Alliance Trust Merger in Focus
In parallel with the performance update, investors have been keenly focused on the forthcoming merger between Witan Investment Trust and Alliance Trust (LSE: ATST). The merger, announced on June 26, is expected to combine assets totaling approximately £5 billion, creating a significant presence in the investment trust sector.
Witan provided further details regarding the merger, with the new entity set to be named Alliance Witan Investment Trust (LSE: WTAN). The enlarged multi-manager trust aims to leverage its increased size to reduce dealing costs, a development seen as beneficial for shareholders. Additionally, the new trust is expected to enter the FTSE 100 index, enhancing its profile within the UK stock market.
Subject to shareholder approval, the combined entity plans to distribute total dividends amounting to at least 6.28p per share for current Witan and continuing Alliance Witan shareholders. This would represent a 4% increase compared to the 6.04p per share dividend paid in 2023.
Industry Perspectives
Laith Khalaf, head of investment analysis at AJ Bell, commented on the merger, noting that the £5 billion combination could position Alliance Witan among notable global competitors like F&C Investment Trust (LSE:FCIT) and Scottish Mortgage (LSE:SMT). Khalaf highlighted that while inclusion in the FTSE 100 may boost liquidity and visibility, it may not be a transformative event for the trust, as most passive funds tracking the UK market follow the FTSE All Share index, and many active funds avoid investment trusts.
Khalaf also emphasized the potential benefits for shareholders, including lower annual management fees, which are expected to fall within a range of 0.55% to 0.6% per annum. For Alliance Trust shareholders, the investment strategy is expected to remain consistent, with the added advantage of reduced annual charges. Witan shareholders, on the other hand, may benefit from a potential turnaround in performance after a challenging period, although they will need to assess whether the new combined trust aligns with their investment preferences. Witan shareholders are being offered a cash exit option at a slight discount to NAV, though this offer may be subject to scale-back depending on demand.
