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An update on the Witan Pacific Investment Trust from Witan Investment Services Director Andrew Bell.
Bookmarks:
0|Witan Investment Trust plc
64|Overall performance
87|Why Japan
155|Why will it be different
238|Interest
280|Narrowing discount
329|Growing income
380|Divindend
470|Summary
Duration:
00:08:28
Recorded Date:
3 May 2013
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Transcript:
Presenter: To talk about Witan Pacific Investment Trust plc we’re joined from Witan Investment Services by Director Andrew Bell. Andrew, it’s been a year now since Matthews Asia and GaveKal were appointed alongside Aberdeen. How have those new fund managers performed, and what effect has it had on the overall performance of Witan Pacific?
Andrew Bell: Well, it was a very successful transition, and both of the new managers actually outperformed between the end of April and the end of the company’s financial year, which was January, which is all we’ve reported on. And they performed at different points. So there was a diversification benefit as well that all three were contributing to the returns of the trust but not all at the same time, so a slightly smoother ride.
Presenter: Excellent, good, and that’s really come through in terms of the overall performance numbers.
Andrew Bell: Yes, it has. The company outperformed its benchmark by about 3½% last year, which was a marked improvement on earlier years, and occurred fairly persistently through particularly the first half of the year and then fully participated in the gains in the markets in the second half.
Presenter: Witan Pacific is slightly unusual in that it covers the whole of the Asian region including Japan. Why should investors consider an investment trust that includes Japan in this area?
Andrew Bell: Well that is an interesting question because Japan for most of the last twenty years has been a real investment dog. But we still have to remember it’s one of the top three economies in the world, and therefore it has a degree of importance. And that’s been reflected in an increasing interdependence within the Pacific region which used to be dominated by Japan, and now if you like there are three different bits. There’s Australia on the resources side, there’s Asia driving the growth, and there’s Japan as a source of technology and expertise as well as a big population. And so apart from that interdependence which says you shouldn’t ignore one of the biggest bits of it, more recently they’ve elected a new government and adopted a much more aggressive economic policy, which we don’t know at this stage whether it’s going to work or not, but they’re trying a lot harder to try and break out of these twenty years of deflation and depression.
Presenter: Now you and I must have seen a number of Japanese fiscal stimuli that have singularly failed over the years, why should people have any confidence that it’s going to be different this time round?
Andrew Bell: I think the thing that’s different is there’s a degree of coherence between the monetary policy makers and the Ministry of Finance and the politicians. For much of the last twenty years they’ve disagreed on how to tackle the problems of the Japanese economy, whereas now they all appear to be trying to effectively flatten the pedal to the metal in terms of trying to break the economy out of its slough of despond. It doesn’t guarantee that it will work but at least you’re not finding that one part of the body politic is working against the others.
Presenter: But your fund managers are finding real opportunities in companies in Japan.
Andrew Bell: Yes, it’s very much a company story. All three of the manages are predominantly stock pickers in terms of what they’ll buy within the market, and it happens that the trust has a lower than index weighting within Japan, but the key point is that it’s driven by companies which the managers think are attractive. And if Japan becomes more attractive they’ll presumably buy more companies, and if it becomes less attractive they’ll buy others, but at least they’re able to participate in what could be a different story for Japan in the next five years, in a way that if you excluded Japan you wouldn’t be able to.
Presenter: Have you seen an increase in the number of investors that are interested in this particular trust because of its exposure to Japan?
Andrew Bell: Well, that’s hard to tell exactly, but what happened is that the trusts which invested in Japan and Asia have for much of the last few years tended to trade on a wider discount than those which invested in Asia alone. And over the last six months that discount has tended to narrow in, particularly for Witan Pacific. And that’s one of the most obvious explanations for that would be instead of people trying to run away and avoid any exposure to Japan, they’re actually finding the mixed exposure you can get through a company like this a bit more attractive.
Presenter: Now income is a growing objective for many UK investors, what is the potential for growing income from Asian companies?
Andrew Bell: Well Asian dividends have been a growing feature of the global investment landscape over the last ten years, because you’ve seen very strong economic growth from the region and a greater willingness of companies to pay out cash to shareholders. Because company management in the past used to view cash generation as rather a nice little if you like slush fund to go and make acquisitions, and governance in the region has become of a much higher standard over the last ten years, so there’s now recognition that the cashflow belongs to shareholders, and the management may invest it in new businesses or whatever but they should do that on the basis that that’s a better option than returning it to shareholders.
Presenter: Now you’ve moved from paying a dividend once a year to twice a year on this trust, why have you done that and what effect has it had on the trust?
Andrew Bell: I think it sends a signal that the company views the income from the trust as being a tangible part of the investment return shareholders will enjoy, rather than just a once a year afterthought. It also makes people who live on their dividends, makes it easier for them to plan their income. Obviously nobody’s going to live just on dividends from one shareholding. But if you have a number of dividends arriving in all the different months through the year you don’t have to wait until everything to arrive in one year and then you have a whole twelve months spending to it. So we think it’s a shareholder friendly thing, particularly for retail investors.
Presenter: And do you think that’s going to change the nature of the investors who invest in Witan Pacific?
Andrew Bell: The shareholder base is reasonably widely spread. There are some small institutions on the register and there are quite a lot of private individuals, and for the latter particularly having an investment brief that looks at Asia as well as Japan can be more useful than average, because most private investors don’t have the expertise to make a call as to whether they should be investing in Japan or Hong Kong or Australia. And so if you’re effectively subcontracting that decision to Witan Pacific’s Manager, so I would expect that the trend over the years for retail ownership of investment trusts to be reflected further in Witan Pacific’s register as well.
Presenter: Okay then, a summary Andrew, for the region and for the trust itself.
Andrew Bell: Well as somebody once said you should never make predictions particularly about the future, but we’ve seen for the last ten or fifteen years that Asia as a whole has been something of a growth honey pot, and although there are some structural problems as the economies mature, the sense is that even when they have problems they’re still growing at twice the rate of the economies in Europe and North America. And so that underlying growth should continue to be quite a favourable tailwind for equity returns in the region.
Presenter: On that note we’ll leave it, Andrew, thank you.
Andrew Bell: Thank you.
This is a short video presentation provided by Witan Investment Services which contains an interview with Andrew Bell, a Director of Witan Investment Services. Investments and or investment strategies mentioned in the presentations may not be suitable or appropriate for all recipients.
It is your responsibility to seek investment advice before making an investment decision. This material is a marketing communication issued and approved by Witan Investment Services Limited for informational purposes only and does not constitute a solicitation or a personal recommendation in any jurisdiction.
This video refers to the performance of Witan Pacific Investment Trust. At the time that this video was filmed (May 2013) the discrete performance of the Trust was:
Q1 2008 – Q1 2009 Q1 2009 – Q1 2010 Q1 2010 – Q1 2011 Q1 2011 – Q1 2012 Q1 2012 – Q1 2013
Net Asset Value (Total Return)* -18.7 57.4 9.5 -1.1 19.4
Benchmark** -17.2 49.5 5.4 -3.7 16.0
*Source: Datastream to 31/03/2013. Total return includes the notional investment of dividends.
** Benchmark is the MSCI AC Asia Pacific (£).
For a full overview of the Trust’s performance please visit www.witanpacific.com
Witan Pacific Investment Trust is an equity investment. Please remember that past performance is not a guide to future performance. Please also remember that the value of an investment and the income from it can fall as well as rise as a result of currency and market fluctuations and you may not get back the amount originally invested.
This video refers to discounts. When the share price is lower than the Net Asset Value (NAV), it is referred to as trading at a discount. The discount is expressed as a percentage of the Net Asset Value.
Any reference to individual securities does not constitute a recommendation to purchase, sell or hold the investment. Any opinions expressed are the current opinions as of the date of appearing in this material which is May 2013. No reliance may be placed for any purpose on the information and opinions contained in the presentations or their accuracy or completeness. No part of this material may be copied, photocopied or duplicated in any form or distributed to any person that is not an employee, officer, director or authorized agent of the recipient, without Witan Investment Services Limited's prior permission.
Issued and approved by Witan Investment Services Limited. Witan Investment Services Limited is registered in England no. 5272533 of 14 Queen Anne's Gate, London SW1H 9AA. The VAT registration number for Witan Investment Services Limited is 863 5738 89. Witan Investment Services Limited provides investment products and services and is authorised and regulated by the Financial Conduct Authority. We may record telephone calls for our mutual protection and to improve customer service.
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Contact: Witan Pacific Investment Trust