Ben Yearsley, investment consultant at Fairview Investing, says that while he welcomes the merger, he feels an opportunity has been missed to be more aggressive on costs.
He says: “The issue that multi-manager funds have had in recent years is that multi-asset funds, that is, those that invest directly in underlying stocks rather than underlying funds, tend to be cheaper. Right now Columbia Threadneedle have a product that can do that for 0.29 per cent.
"I think given the £5bn size of this trust, at a time when outflows are plentiful in the industry, and given the huge number of firms that expressed an interest in this, I do wonder if they could have maybe got the fee down to 0.40 per cent and made it really interesting. But I think the performance of Alliance Trust has been good in recent years.”
James Carthew, head of investment company research at QuotedData, says: “I am in favour of this merger. I think Witan shareholders moving over to Alliance Trust will be getting similar geographical exposure and style exposure, but with better performance.
"I think the reason Alliance Trust has performed well is that it has exposures to different parts of the market and different styles, so its not reliant on something like the oil price going up or down. That tends to mean that even when it has rough patches, they don’t tend to be that rough."
Tim Norris, investment manager at London Wealth Management, says he is sceptical that bigger funds perform better, and so has reservations about this merger.
He does not tend to allocate to multi-manager funds, but notes: “For the right type of end-investor they clearly do play a role of providing diversified exposure, often with focused and well defined managers, who would not always be recognisable or available to both retail investors and in many cases professional investors either.
"Especially if the strategies are either closed to new money or in structures that do not immediately marry up with the UK retail investors requirements. The closed ended structure in this instance can alleviate this as the multi-manager is not required to provide liquidity at the fund allocation level due to the closed pool of investment capital they manage.”
Witan has five employees, each of those have been 'Tuped' across – that is, their rights guaranteed to be transferred across to the new business – at least initially to be employees Alliance Trust, and each are discussing their futures with the trust.
David Thorpe is investment editor at FT Adviser
