Witan Pacific investment trust has hired Baillie Gifford as its new investment manager and will be renamed Baillie Gifford China Growth Trust plc, the board has said.
In a statement to investors on Wednesday (22 July), the board said it has sacked multi-manager expert Witan and will seek shareholder approval to appoint Baillie Gifford.
Baillie Gifford will be tasked with turning the vehicle into a China-focused mandate, with the objective of seeking long-term capital growth by investing predominantly in shares of, or depositary receipts representing shares of, Chinese companies.
The new portfolio will consist of a diversified selection of 40 to 80 holdings, with up to 20% of total assets allowed to be invested in unlisted securities. It will also be able to employ gearing of up to 20% of gross asset value at the time of drawdown.
Baillie Gifford confirmed the trust would be run by Sophie Earnshaw, currently co-manager of the Baillie Gifford China fund, and Roderick Snell, currently manager of the Baillie Gifford Pacific fund.
Baillie Gifford's director of retail marketing James Budden said a Chinese equity strategy was "a fitting addition to our investment trust range", with the management duo bringing "significant expertise and experience in China".
Budden continued: "Baillie Gifford has a strong track record investing in China having invested in the region over several decades.
"At the end of June 2020, the firm had over £44.6bn invested in both Chinese listed and unlisted companies via its global and regional funds and trusts, and now has a research centre operational in Shanghai.
"We will realign the portfolio to invest in our best Chinese growth ideas, seeking high-quality companies with strong competitive positions that can deliver strong earnings growth over a number of years.
"The trust will differ from the open-ended fund in that it will also incorporate unlisted and smaller company investments. We believe these changes should enhance the appeal of the Trust and attract new investors, particularly those looking to allocate directly to Chinese equities."
Witan Pacific said it would honour its commitment to allow shareholders to realise part or all of their investment in the company with a tender offer for up to 40% of shares in issue at a 1% discount to net asset value at the time of the offer.
Chair of Witan Pacific Susan Platts-Martin said the trust had initiated an "extensive and competitive review of the company's management arrangements".
"The board believes that China provides a compelling investment opportunity that is currently underrepresented in global portfolios," Platts-Martin said.
"China's domestic stockmarket and economy have grown to become the second largest in the world and we believe that China will be one of the most important markets of the next decade.
"We are delighted that the company will be able to access Baillie Gifford's proven experience investing in China given its strong track record in this area.
"The board believes that the move to a China growth strategy will provide shareholders with a truly differentiated investment proposition that should lead to a tightening of the discount and growth of the Company through superior investment returns."
For its part, Witan said it "fully supports" the move and was "pleased with the outcome of the process", with its subsidiary Witan Investment Services Limited (WIS) having supported and assisted the board in its review.
"Prior to the review, WIS indicated its readiness to cease its executive services role at a time to be mutually agreed with Witan Pacific, which is expected to be during September 2020," Witan said in a statement.
"Witan has valued its 15-year relationship with Witan Pacific, commends the board for its consistency in taking decisions which clearly prioritise the long-term interests of shareholders and wishes Witan Pacific well for the future."
The news is the latest in a series of investment trust wins by Baillie Gifford. The Edinburgh-based firm took over European IT from Edinburgh Partners in October, renaming it Baillie Gifford European Growth trust. That followed Schroder UK Growth trust moving to Baillie Gifford in 2018 to become Baillie Gifford UK Growth.
Witan Pacific has returned 16.5% in the past three years, FE fundinfo data shows, below its IT Asia Pacific sector peers' average of 20.5% but slightly ahead of its MSCI AC Asia Pacific benchmark's 15.6%.
It had been run under a multi-manager structure, with management duties outsourced to Aberdeen Standard Investments, Matthew Asia, Robeco and Dalton Investments.