UK Edition
Questor: the reinvented Alliance Trust has proved itself and is worth holding on to
Questor investment trust bargain: three years ago we opted for a cautious approach as its new incarnation took shape but the trust now seems on a firm footing
It seems we were unduly cautious when we advised readers three years ago to sell Alliance Trust and opt instead for what appeared to be the more stable choice of Witan.
Alliance had just embarked on a restructuring that we welcomed but were inclined to treat with some scepticism until we had a sense of the results it would produce.
Enough time has now passed to form a judgment and we can say that the reinvention of Alliance Trust, one of Britain’s oldest and most widely held investment trusts, has gone well.
The fund, which three years ago was about to be transformed into a “multi-manager” portfolio overseen by external experts at Willis Towers Watson, the consultancy, has gained 33.4pc over that time.
Witan, meanwhile, which we preferred because its own multi-manager structure was already firmly bedded in by then, has risen by 27.9pc over the same period. The FTSE 100, Questor’s chosen yardstick for all our stock and trust selections, even though Alliance and Witan invest globally, has gained just 5pc.
It’s true that a more specific comparison with global investment trusts tracked by the Association of Investment Companies shows both Witan and Alliance lagging: the AIC’s global sector has gained 52.8pc in share price total return terms (that is, with dividends reinvested) over the past three years, while Witan has returned 35.7pc and Alliance 40.5pc.
However, both are long-established trusts run on a conservative basis with the aim of steady wealth accumulation over decades or even generations. They have also been less volatile than almost all rivals over the past three years. We see both as worth holding.
Questor says: hold/hold
Ticker: ATST/WTAN
Share price at close: 858p/229.5p
Update: Fidelity China Special Situations
Another trust tipped early in 2017 is Fidelity China Special Situations, which we recommended on the basis that, despite a doubling in its share price over the previous three years, a sizeable discount of 14pc remained. Since then the shares have gained a more sedate 22.8pc and the discount has narrowed to 9.4pc.
Analysts at Winterflood, the broker, said that they continued to rate Dale Nicholls, the manager, highly and that he “benefits from the depth of resource at Fidelity”.
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Over the past year the trust’s shares have gained 25pc but this performance has been comprehensively trumped by the 58pc increase achieved by the fund’s closest rival, JPMorgan Chinese. However, we are alive to the dangers of chasing performance, especially in a market as volatile as China’s, so advise holders of Fidelity China Special Sits to sit tight and resist the temptation to switch.
Questor says: hold
Ticker: FCSS
Share price at close: 242.5p
Update: Fidelity Special Values
We tipped this trust, which invests largely in unloved British stocks, in November 2018 and it has gained 11pc since.
This respectable though unspectacular return reflects the fact that the fund’s “value” style of investing has been out of favour for much of the time. However, there are signs that this is changing, so now would, in Questor’s view, be a bad time to sell the trust.
It also has a highly regarded manager in Alex Wright. Winterflood said Mr Wright’s stewardship of the portfolio since 2012 had been “impressive, reinvigorating the fund’s rationale as an investor in special situations”. The broker added: “Alex has the benefit of extensive knowledge of the UK small-cap market and is supported by a well resourced research team.”
Questor says: hold
Ticker: FSV
Share price at close: 275.5p
Investment trust news
Henderson Alternative Strategies is to be wound up, subject to shareholder approval. There will be a “managed realisation process” expected to last no more than two years.
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