Two large generalist global investment trusts – Alliance (ATST) and Witan (WTAN) have announced a proposed merger. Alliance is slightly larger with assets of £3.8 billion versus Witan at £1.8 billion. Both have relatively low charges – for example Alliance has an ongoing charge of 0.62% according to the AIC and one justification for the merger is that charges will reduce further on a larger combined portfolio. The relative portfolios already overlap to some degree.
Alliance Trust has produced better performance over the last 5 years and have done very well since the revolution in management a few years back with a particularly good performance last year – NAV Total Return up 21.6% and ahead of their benchmark.
I can see why the merger might be of benefit to Witan shareholders but as a holder of Alliance Trust shares I can see little benefit. A marginal reduction in charges will be offset by the negative aspect of having a larger portfolio. Stock-picking gets more difficult the larger the portfolio becomes.
I shall probably be voting against the merger on those grounds.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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