Witan Investment Trust faces "an uphill struggle to repair the material damage inflicted upon what is a strong brand", according to one broker, as analysts weigh up the 111-year-old trust's prospects after its managers admitted they may have been "afflicted with a reverse Midas touch".
A prolonged period of "unusually poor performance" forced managers Andrew Bell and James Hart to apologise to investors and to overhaul the global multi-manager trust's underlying mandates.
Bell and Hart said 2020 had been "a disappointing time for our shareholders", as the Covid-19 pandemic sent losses for the year to the end of May to 17%, well below its benchmark's 5% loss.
The managers attributed three-quarters of that to poor performance of its underlying portfolio, exacerbated by entering the Covid crisis highly geared and the cost of early repayment of the trust's secured bonds.
Witan moved to a "new and simpler benchmark" at the start of the year, comprising reduced UK and higher US weightings.
Despite that, its underlying portfolio, which is tilted towards value, continued to run an overweight to the UK and underweight to the US, as well as the tech sector.
"In view of the reduced political uncertainty in the UK and improving expectations for economic growth outside the US, we decided, wrongly as it turned out, to move only gradually to align our manager allocations to reflect the more global structure of the new benchmark," the managers admitted.
This proved costly, with the UK and Europe performing much worse than the US, which was boosted by its high weighting in technology stocks.
That was made worse by Witan's global managers running an underweight to the US and reducing their tech exposure. This positioning was "confounded by the lockdown measures adopted to contain the Covid-19 epidemic".
In response, Witan sold its European equity portfolios managed by Crux Asset Management and S.W. Mitchell Capital, reallocating the proceeds between some of its global managers.
Witan also removed its global systematic value portfolio managed by Pzena Investment Management, with the proceeds being stashed into equity index futures and a US equity market ETF while it looked for a "more stylistically neutral" replacement.
The pair said Witan would step up its level of share buybacks to combat volatile discounts, while assuring investors it would draw on its revenue reserves, if needed, in order to "extend its record of 45 consecutive years of dividend rises".
"Shareholders could be forgiven for thinking Witan and its managers had been afflicted with a reverse Midas touch - everything we touch having seemingly turned to lead earlier in the year," Bell and Hart said.
"The impact is all the greater coming after a strong 2019. I apologise to our shareholders for the poor performance so far this year."