Thinking of replacing Witan with Monks

[Newroad]

Hi all.

Thinking about replacing WTAN with MNKS, for the active global component of our ISA's equity portfolios (roughly 30% of each).

Or more accurately, thinking about replacing WTAN with something, probably MNKS. Can't be ATST or FCIT, as they are the active component for other parts of the porfolio. Probably shouldn't be SMT, as it's performance may be more closely correlated to the passive component of the the ISA's (due to big tech being a large component of both).

Simple upsides seem to be historic performance and cost (perhaps related to not being a de-facto fund of funds). Simple downside seems to be current discounts to NAV - suggesting perhaps that if I do it, I wait and try and time it (but if so, what exactly is a sensible differential as a trigger point, e.g. 5%)? I'm sure there's more.

Thoughts anyone?

Regards, Newroad

[Parky]

I was thinking of moving from Monks to something less growth oriented. Monks has had a very steep rise and is due for a correction (as is Scottish Mortgage).

[shetland]

I am surprised that you consider FCIT an active trust. Its performance is no better than a world tracker. Monks is an excellent trust, a core holding for me.

[Newroad]

Hi Parky.

I'm not sure the MNKS (rise?) and SMT's (steep rise?) are that comparable. Indeed, I would say MNKS performance was closer to that of WTAN until Covid-19 hit - and probably still so after.

However, I understand the tenor of what you are asserting.

Regards, Newroad

[Newroad]

Hi Shetland.

Perhaps it's a little simplistic, but anything that is not passive I regard as active - and if not, the only material differences should be tracking error and costs. However, there are certainly degrees of activeness.

More importantly, FCIT's (and other similar trusts') managers could, for example, elect to underweight big tech - or the UK - or whatever. If the don't, and choose to closet track for periods, so be it - that's why I'm (partly) paying for active management - to use their discretion.

Regards, Newroad

[shetland]

But when has FCIT been anything but a closet tracker ? Its performance is very poor over any given period.

[Newroad]

You can answer your own (intended as rhetoric) question, Shetland.

Should you wish to. But how about, as an example, looking at the immediate three years pre-Covid and comparing the passive equity component of my portfolio (VWRL) with FCIT?

Regards, Newroad

[monabri]

I am surprised that you consider FCIT an active trust. Its performance is no better than a world tracker. Monks is an excellent trust, a core holding for me.

FCIT at 2x + more expensive....I can see the point of VWRL over FCIT ( over the last 5 yrs anyway)

[Newroad]

That's a different consideration, Monabri.

There are many prepared to argue the case for just passive - they may yet be right (as might the other way around).

However, I'm going straight down the middle in that respect - within any asset class, half active*, half passive - those familiar with my wheat and sheep argument will know my line of thinking.

My original post and the question therein was in this context. Answers to this actual question not mandatory, but gratefully received.

Regards, Newroad

* notwithstanding dissenters to this classification of FCIT and perhaps some other trusts

[scotia]

I can see the attraction in selling Witan, and I can also see the attraction of buying Monks. But it does reduce your UK holdings in this transaction from 27% to 5% and increases the USA share from 35% to 50%. Now this may not be a bad idea. But if you still wanted to hold onto some UK exposure, without having to pay a significant penalty, then you might like to look at Royal London Sustainable World (an OEIC). It has 39% in the USA and 37% in the UK. On a 5 year total return basis it has outperformed F&C, Alliance Trust and a Vanguard All-World tracker (VWRL). But it certainly lags well behind Monks.
I have recently taken a modest investment in it in the hope that the UK stockmarket eventually shows some progress. Maybe not a clever idea?

[Newroad]

Thanks, Scotia.

Those are some very useful observations - much appreciated! The only subtle additional observation I would make is UK-listed exposure, i.e. the FTSE 100 in large part, is different from exposure to "UK PLC" per se. But this doesn't detract from the overall portfolio variation point you make - and I get a fair whack of US exposure already from VWRL.

Maybe, both because of your UK observation, noting also that some Brexit risk may be built in, and the c10% difference in NAV's (which is far from consistent over time) I should wait a month or two more before considering such a move. This would get through the US Election and key Brexit outcomes, with any related financial repercussions.

On Royal London Sustainable World, I am against OEIC's (and Units Trusts) as vehicles - but that may or may not be an outdated prejudice. One to look at another day perhaps.

Regards, Newroad

[shetland]

It is a great shame that you have become people have challenged your assumptions but I thought that one of the benefits of this forum was that people did offer different views and ways of looking at things. I have personally gained a lot by others take on issues.

I would also challenge you comment that SMT is closely correlated to passives. What is there about the performance of SMT and trackers that is correlated. Perhaps Monabri would update his excellent chart to include SMT.

[richfool]

I held Witan some years ago, but after a period of good performance, it's performance dropped off and I got rid of it. Currently I hold Mid Wynd, Monks and SMT in that sector. Accepted there is some overlap between holdings of Monks and SMT.

I tend to look at the what the managers are saying as well as performance and asset allocation. It was the managers philosophy that drew me to Mid Wynd (more cautious and less technology focussed) and subsequently to Monks and SMT. Baillie Gifford focus on "themes".

[Dod101]

SMT is not a technology trust. Its theme is to invest in disruptors and if many of them happen to be in technology so be it. Both Witan and Monks are generalist trusts but that is about as far as the similarity goes. Monks is a bit less aggressive than SMT and to that extent, might suit the OP better as he is replacing a fairly conservative Witan. Obviously he will lose the income from Witan but presumably knows that. As a good balanced growth IT, I think Monks is a good choice. Personally I do not concern myself with the geographic balance; leave that to the managers. That is my simple answer to the OP's simple question.

Dod

[77ss]

Hi all.

Thinking about replacing WTAN with MNKS, for the active global component of our ISA's equity portfolios (roughly 30% of each).

....Simple downside seems to be current discounts to NAV - suggesting perhaps that if I do it, I wait and try and time it (but if so, what exactly is a sensible differential as a trigger point, e.g. 5%)? I'm sure there's more.

....

Over the past few years I have looked at Witan now and again, and every time decided that its performance was inadequate (TR basis). So I think you are right to look for a better home.

FWIW, I bought a full holding in Monks this June. Early days, but so far so good. The bulk of the money came from a large top-slice of an overweight holding in FCIT - I am happy to hold FCIT as part of my IT collection, but not to be too overweight in it.

I don't pay too much attention to discount/premium - as long as neither is large.

[Newroad]

Hi 77ss, Dod101 and Richfool.

Thanks for your responses.

The history of WTAN for us was/is a slow build up via an ISA (pre our II accounts). A couple of takeovers of brokers/ISA savers forced me to address matters - ending up with said II accounts. Gradually, we've migrated everything over to II - with my wife's Prudential stakeholder pension being the last piece soon to enter. Hence, WTAN hasn't really affected overall performance much one way or the other thus far - my ISA is about 9% of the II portfolio and WTAN about 30% within that - so a bit less than 3% overall currently. The SIPP and the kids JISA's are much larger - the latter being beneficiaries of being 100% FCIT (in a CTF) until recently - which was more than fine for kids born either side of the GFC.

However, with mortgage paid off etc, we have now started ploughing a lot more into the ISA - so in the future, it will become a much bigger part of the success or otherwise of the overall portfolio. Hence, considering this matter in more detail now. I'm not looking to shoot the lights out - if I do, it will be an accident. Just looking for a down the middle, part active/part passive, part equity/part bond portfolio - ideally low maintenance. I'm happy enough with where I'm at - but as some posters have observed, it seems a reasonable idea to revisit WTAN in context.

[Shetland] The language underpinning

"It is a great shame that you have become people have challenged your assumptions ..."

is not clear to me, not within it, who "you" refers to - me, someone else, a few people? Assuming the former, I think most respondents have done a decent job at addressing the question originally asked in the spirit it was intended, whether they agree it's a good idea or otherwise. Similarly, I don't think

"Probably shouldn't be SMT, as it's performance may be more closely correlated to the passive component of the the ISA's (due to big tech being a large component of both)."

was particular indicative of someone having made their mind up they were right - the use of "probably" and "may" being somewhat of a give away in this regard. I would also be careful about conflating "correlation" with "[absolute] performance" - if asking Monabri for anything, a chart may not be the answer - perhaps a correlation coefficient might be (and a second one, for risk adjusted return, may also be of interest). If one were to ask for a chart, measuring these two over time might be the thing to request.

Nevertheless, to try and assist, if this works* (i.e. inserting an image) here is VWRL and some of the others we've been discussing since it's inception in the UK.

https://postimg.cc/R68KDQ4x

Certainly amazing outperformance from SMT, even more so recently. Also interesting to note WTAN's earlier OK performance and MNKS poor one - Dec 2018 seems to be when a lot of them start diverging in different directions.

Regards, Newroad

* it didn't, even with the IMG tags either side, but having now removed them, the link appears to

[Dod101]

As far as Monks is concerned the managers, Baillie Gifford, I gather became very embarrassed with its performance and around the time you mention, changed the manager within BG and put a senior partner, Charles Plowden, in to run it with an assistant. The better performance is because of that change. Note that Plowden is due to retire next year but I am not sure that should make too much difference. SMT has had an amazing run in the last year or two, largely arising form Tesla and a few other shares. It cannot keep that up but even so I will having extracted a lot this from it this year, will let it run. From 1 January I have extracted, over three sales in the last 9 months, 50% of its January value and still have the same as at 1 January. I wish all my shares were like that.

Dod

[Hyndford]

I understand the reasons for looking to replace Witan as the recent performance has been disappointing.

I'm sticking with them for now and am adding to my holding.

I like that the board have recognised the poor performance and looked to make some changes with a greater global focus.

The board are also actively looking to reduce the discount which is currently around 8%.

When both of these work through I'm expecting some better performance.

I also hold SMT so like the contrast that Witan provides.