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Why Witan Pacific shares are bouncing back

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The Witan Pacific Investment Trust has been putting in some good numbers recently ahead of an earnings announcement scheduled for Friday.

Following a crash in its shares in late September, the trust has been recovering over the winter months and since January has seen its shares ascend to over 325. It has been quite the turnaround but will it be enough to satisfy shareholders?

Witan Pacific is a pan-Asian stockmarket investment trust, investing in shares across the Asia Pacific region, including Japan and Australia. With approximately GBP 190 million under management, it is trading at a premium discount of around 12% at time of writing. But what has been behind the sudden surge in value in its shares?

The trust had been struggling. It allocates management of its portfolio of Asian shares to four fund managers, but it had been underperforming its benchmark, the MSCI AC Asia Pacific Index, and had been doing that fairly consistently. This is disappointing for investors, who have seen Witan Pacific fall out of bed over three out of the last four calendar years.

The board of Witan Pacific seem to have woken up to the fact that investors can buy ETFs pretty cheaply which will stick more closely to Asian indexes. To justify an active management approach, Witan Pacific needed to come up with something special.

In this case the board of directors announced that if the trust fails to deliver outperformance versus the benchmark before the end of January next year, they will let investors cash out at as close to NAV as possible by the end of January 2021. This has provided a boost to the Witan Pacific share price.

Witan Pacific assets are currently managed by four firms, namely Robeco, Aberdeen Standard, Dalton Investments and Matthews Asia.

“Given current equity valuations, against a background where interest rates are likely to remain well below historic norms, we believe that 2019 has the potential to deliver attractive returns despite, or partly because of, the pervading gloom at the end of 2018,” says Andrew Bell, chief executive of the Witan Investment Trust.

Witan has got to put a brave face on things as investors will take its offer and redeem if it can’t turn things around with Witan Pacific. The external managers will be under pressure to deliver from Asian markets this year and it won’t be possible to bet the farm on Chinese economic growth in 2019.

Witan refocusing on asset management, drops ISAs

But wait, there’s more. Witan seems to be in refocusing mode, having said that it was exiting the ISA / savings scheme market and offering the 16,000 retail clients who had invested in these products the option of transferring their investments for free to Hargeaves Lansdown. Investors were also given the option of transferring into either the Witan or Witan Pacific investment trusts.

By the sounds of it, Witan was finding there was just too much competition for this kind of business at the moment and was refocusing on its core investment management competency.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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