In 2016, Witan Investment Trust achieved a net asset value total return of 22.9%, in line with the benchmark* return of 23.0% and increased its dividend by 11.8% to 19.0p, the 42nd consecutive annual rise.
The highlights of the results are:
- The Net Asset Value (NAV) total return of 22.9% performed in line with the benchmark’s* return of 23.0%
- The share price total return was 18.4%, as the discount widened to 4.0% at the year- end (2015: discount of 0.2%)
- The NAV total return over the last five years of 108% is 25% ahead of the benchmark’s 83%*
- 18.9m shares were bought back at a discount to NAV, adding £9.2m to net assets
- The 8.5% Debenture was repaid, reducing borrowing costs
- The dividend increased by 11.8% to 19.0p, well ahead of the 1.6% rate of inflation and more than double the level paid ten years ago
Harry Henderson, Chairman of Witan Investment Trust said:
“Witan has been operating a multi-manager approach for over twelve years, with the aim of providing superior results for its shareholders and over this period decisions by our in-house Executive team and our chosen external managers have enabled Witan to beat the returns on our equity benchmark and raise the dividend significantly faster than the rate of inflation. Whilst there are many uncertainties in the world, and at the best of times future performance can never be firmly predicted, our objective remains to extend this successful record.
“2016 was an unusually testing year for many equity managers. A volatile start to the year saw sizeable falls in equities during January but the year ended with outsize returns for sterling investors as a result of the fall in the pound following the Brexit referendum. Witan shareholders enjoyed a profitable year, although the net asset value total return was a smidgeon behind our benchmark. The dividend for the year was increased significantly, the 42nd consecutive year of rising dividends at Witan.
During 2016 Witan’s shares moved to a discount and in response we bought back shares persistently and purposefully, in accordance with our objective for Witan’s shares to trade at a sustainable low discount (or a premium) to NAV, subject to market conditions. This activity was accretive to NAV and helped reduce the discount, which was 4% at the year end.
Andrew Bell, Chief Executive of Witan Investment Trust, said:
No account of 2016 would be complete without mention of the extraordinary valuations reached in bond markets. After several years when government bond yields had been steered lower as a means of stimulating economic growth, the process went into overdrive in 2016, with over a quarter of government bonds at one stage offering negative yields to investors. Paying for the privilege of lending money to governments is a curiosity - akin to paying rent to the tenants of a house you own.
Given the influence of politics during 2016, active managers, who tend to concentrate on company-specific factors, in general found the going difficult and the majority of our third party managers underperformed during the year, in contrast to 2015. However, our active use of gearing and share buybacks meant that, even with a relative performance shortfall from our portfolio we were able to end the year with performance very close to the 23.0% rise in our benchmark, after all costs.
The strength of equity markets during 2016 reflects increased hopes for faster, or more balanced, economic growth in 2017. A significant fiscal stimulus is also expected from the new Trump administration in the US, in the form of tax cuts and infrastructure spending. There is a risk of disappointment if this takes longer than expected to implement, or is significantly diluted.
The UK’s eventual departure from EU membership may have both good and bad consequences for the UK’s economic performance in coming years, some of which are not currently predictable and will differ from sector to sector. Our assessment is that this is primarily a UK economic and political issue. Given our flexible global investment remit, it represents one of many factors that both Witan and its external managers take into account in making decisions about where to invest our shareholders’ funds.
Inflation is rising, albeit from a very low base. Government bond issuance is set to rise, at a time when central bank buying is slowing down. These are factors against which the level of bond yields offers very limited protection. A major rise in yields could undermine equities, even if underlying economic growth improved. Consequently 2017 seems likely to require a more selective approach to equities after the landmark returns enjoyed in 2016.
A video interview with Andrew Bell, Chief Executive Officer of Witan Investment Trust, discussing the 2016 full year results can be viewed on the Company’s website here.
- ENDS –
*From 01.10.2007 until 31.12.2016, the Witan Investment Trust benchmark was a composite of the following four equity regions: UK 40%, North America 20%, Europe (ex UK) 20% and Asia Pacific 20%. From 01.01.2017, Witan’s benchmark consists of UK 30%, North America 25%, Europe (ex UK) 20%, Asia Pacific 20% and Emerging Markets 5%.
For further information please contact:
Andrew Bell, Chief Executive Officer
Witan Investment Trust plc
Tel: 020 7227 9770
Hannah Philp. Director of Marketing
Witan Investment Trust plc
Tel. 020 7227 9770
Notes to Editors
Witan Investment Trust plc
Established in 1909, Witan is one of the UK's largest investment trusts, managing £1.9bn (source: Witan, as at 31.12.2016) on behalf of over 21,000 investors. Witan operates a multi-manager structure and currently has 11 appointed managers. For further details please visit www.witan.com.