Saturday, February 1, 2020

Analysis of Witan Pacific Investment Trust Plc- Fund Management Essay

Analysis of Witan Pacific Investment Trust Plc- Fund Management - Essay Example Witan Pacific is an investment trust that was established in 1907 as General Investors & Trustees Limited (GIT). The company then used to invest in a diverse range of assets. Following the 1929 market crash, the company shifted from equities to Treasury Bills, cash and British Government Securities. GIT merged with City and Gracechurch Investment Trust in 1975. GIT was renamed F&C Pacific Investment Trust in 1984. In 2005 it adopted a multi-manager approach where Witan Investment Services was entrusted with management of the operations and Aberdeen and Nomura became the investment managers of the company (Witan Investment Services Limited, 2012). Investment Objective The investment objective of the fund is to give its shareholders a portfolio of investments with a balance of assets in the region of Asia Pacific with the aim to outperform MSCI AC Asia Pacific (Witan Pacific, 2011, p.1). Investment Strategies In order to achieve the aim and objective, the fund has devised a set of strategies: In order to diversify risk and add value for investors, active multi-manager approach is used. The company faces the foreign currency exchange risk and equity market risks in emerging markets such as settlement risks with regional exchanges. Other risks include selection of investment managers and other generic risks related to specific country. The company does not use foreign currency hedging instruments but regularly report the sensitivity analysis of each foreign currency exposure. This might be due to the fact that using hedging instruments with underlying emerging markets currencies except yen may add to the existing inherent risks. Also the concentrated exposure to Japanese markets has been reduced from 2010 levels (figure 5). The investments are also more diversified on the basis of sectors (figure 6). The multi-manager strategy and regular reviews by the board have helped mitigate the equity market risks and settlement risks because of the different investment approach. Investment in fund with two different investment approaches diversifies risk by averaging the risk and return. Investment in two different funds will increase the costs for the investors. To manage the fund’s growth predominantly through return on capital. The NAV total returns over 1 year, 3 years and 5 years period are more than the benchmark return (figure 12). Over the five years, the NAV has been at premium to the share price of the trust over 5 years. The NAV total returns and total shareholder returns include dividends re-invested. Buy-back shares when the company’s shares are at a discount to the net asset value. The bought back

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