Investment trusts that underweighted the UK and US markets and overweighted Europe and Japan are amo...
Investment trusts that underweighted the UK and US markets and overweighted Europe and Japan are among the best performers in the international generalist sector over the three years to March 2000.
First in the sector was its actively managed portion of Tribune, run by Barings, which had a share price return of 112.83%, compared to the sector average of 63.03% over the three years to March 2000, while Brunner, managed by Dresdner RCM, had a share price return of 104.63% over the same period.
Although one of the leaders in terms of share price performance, Brunner was the most volatile of the 15 trusts in the sector with an annualised standard deviation (ASD) of 23.42% against the sector average of 17.86%. Its beta was the second highest in the sector, after Scottish Mortgage, at 1.2, compared to the sector average of 0.99.
The £2bn Witan Investment Trust, managed by Christopher Clarke, of Henderson Investors, is ranked third out of 15 in the sector over the three years to March 2000. Over that time period it produced a share price performance of 85.18% which was above the sector average of 63.03%.
Witan, launched in 1909, is currently 55% invested in the UK, with 12% in Europe, 19% in North America, 8% in Japan, 3% in the Pacific and 2% in other assets, including emerging markets.
The trust relies on input from eight fund managers, some of which are located globally and others based in London, take a top down approach to investment with each responsible for different geographic areas.
The trust's benchmark is 60% UK and 40% rest of the world. Witan is therefore currently underweight in the UK against its benchmark and has a cautious position on the US market.
Clarke said: "If the US pulls back, so too will the UK so we are holding a cautious stance on these markets. We are positive on recovery in Japan and in Europe, where we consider there are strong growth opportunities."
He attributes recent performance to the trust's play on technology, media and telecom stocks. He said the portfolio moved overweight in telecoms, media and technology ahead of the rally and benefited as a result. Now the fund is 25% invested in these three sectors and 75% invested in other stocks.
He said: "We still have to pay a dividend to our shareholders, which means the emphasis on new economy stocks, which do not pay income, cannot be too extreme."
The trust holds between 200-270 stocks, with its largest holding, Colt Telecom, accounting for 3.5% of the portfolio. Witan is not currently geared, but has a 2% potential gearing. On 9 May, the discount to NAV on Witan was 13.5%.
The trust has an ASD of 17.36%, which is marginally lower than the sector average of 17.86%. Its annualised alpha was 1.42, above the average of 3.6 and the beta is 1.07, above the average of 0.99.
Clarke attributed this just below average level of volatility partly to the trust's exposure to the more volatile telecoms, media and technology sectors. He said a diverse portfolio of stocks and good stock selection keeps this volatility from being higher.
The £2.5bn Foreign & Colonial Investment Trust picks stocks through the use of a top down asset allocation process, as well as bottom up stock selection.
Managed by Jeremy Tigue, the trust had a share price return of 69.62% over the three years to March 2000. This return ranked the trust fifth of 15 in its sector.
He said: "This performance is a result of being heavy in Europe, holding more in the US than most of the trust's rivals, adding to positions in Japan and keeping our nerve in emerging markets."
Tigue said the portfolio is 33% invested in the UK, 25% in Europe, 22% in US, 12% in Japan, and the remainder in the rest of the world.
He is most positive on Japan due to recovery and Europe due to major structural change. The trust is now most cautious on the US, where increased interest rates are expected to be negative for market growth.
The portfolio has an 8% gearing out of a potential 10%, and on 9 May, the discount to NAV was 16.6%.
Foreign & Colonial's ASD is 16.82%, which is below the sector average of 17.86%. Its annualised alpha is 1.42, which is above the average of 0.18. The beta is 1, marginally above the average of 0.99.
Tigue attributed the low volatility to the diverse portfolio of 350 holdings, coupled with good geographic spread.
Following the purchase of Robert Fleming by Chase Manhattan, that company is now the trust's largest holding at 6%.
The Stewart Ivory Scottish American investment trust (Saints) uses a benchmark of 65% FTSE All Share and 35% MSCI World (ex UK) index, offering a higher exposure to UK equities than most others in its peer group.
Marcus Brooks, fund manager, said this higher exposure to the UK meets the demands of its shareholders, who are mostly private investors.
Saints is ranked sixth over the three years to March 2000. It returned 67.45% over that period, compared to the sector average of 63.03%.
This trust changed its investment mandate at the end of September last year, positioning the UK component of the portfolio more towards growth than generating income.
Previously, the requirement of the UK component of the trust was to yield slightly more than the FTSE All Share. Now the board expects the trust to outperform in terms of total returns. Brooks said the fund had significantly lifted its performance since moving towards more growth oriented investments.
Saints, with £507m of net assets, is primarily invested on a bottom up approach, and holds 61 stocks in the UK and 195 international companies. It is currently slightly underweight its benchmark in the UK, with this market accounting for 63% of the portfolio. A further 14% is invested in the US, 13% in Europe, 6.5% in Japan, 3.5% in Pacific (ex Japan) and 1% in other areas.
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