I’m a big fan of investment trusts — companies that invest their own money. In my view, they’re a great way to get an instant, diversified portfolio on a limited budget. I also find trusts useful for getting exposure to sectors such as private equity, where I can’t invest directly.
Beating the market
The investment trust I’m going to look at today was listed on the stock market in 1924. Today it’s a member of the FTSE 250. Shares in this trust have risen by 144% over the last 10 years, compared to 93% for the FTSE 250 and just 30% for the FTSE 100.
The trust in question is Witan Investment Trust (LSE: WTAN). This stock has been one of the most popular buys among Hargreaves Lansdown investors over the last week — and I think they could be right.
Investing in everything
Witan has a long record of beating the market with its multi-manager strategy. Essentially, the trust owns a mix of individual stocks and funds to provide a broad range of exposure that includes private equity, renewables, tech, and consumer goods.
The trust’s top holdings include the GMO Climate Change Fund, Unilever, Google owner Alphabet, and the Apax Global Alpha private equity fund. In addition to growth, Witan’s portfolio also delivers useful dividends, with a current yield of around 2.2%.
Witan’s strategy is designed to create a diversified, global portfolio that can deliver market-beating growth. Although past performance is no guide to future results, this approach does seem to have worked well for many years.
A safe approach?
I can see a few potential downsides to this strategy. Multi-manager funds often carry higher fees than single manager funds, due to all the external management fees they must pay.
That seems to be the case here. Witan charges around 1.7% per year. This compares to a charge of just 0.63% per year at Scottish Mortgage Investment Trust, one of the UK’s top-performing trusts in recent years.
However, Witan’s strong long-term performance means that its higher fees would not stop me investing.
Witan: the ideal investment trust?
I’m wondering if Witan could be the ideal investment trust for my portfolio. Owning a mix of global growth and income investments has helped the trust beat the market and support a dividend that’s risen for 46 years.
Witan’s share price has fallen by around 6% so far this year. This reflects the market sell-off that’s hit many growth stocks. The shares are now up by just 3% from one year ago and are trading below their book value of 258p.
I’m not sure the current market sell-off has finished just yet. But as a long-term investor I don’t try to time short-term movements. I prefer to have my money invested in quality stocks that I can leave untouched for many years.
For me, I think Witan shares are starting to look reasonably priced. I think there’s a good chance the trust’s strong performance will continue, thanks to its consistent long-term strategy.
For these reasons, I’d be quite comfortable adding Witan shares to my portfolio today, as a long-term hold.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Roland Head owns Unilever. The Motley Fool UK has recommended Alphabet (A shares), Hargreaves Lansdown, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
