Alliance Witan plc

Since Willis Towers Watson took over management of ALW in April 2017, the trust has generally delivered positive returns year on year, and what stands out is that this has been achieved across different market conditions. We don’t think this is a coincidence, as having multiple managers, each with their own distinct investment approach, means the portfolio can adapt as markets change.

For much of that period, ALW’s returns have held up well against passive funds, supported by its strong roster of managers who have cultivated a diversified portfolio. In 2023, for example, the trust benefitted from some exposure to the early excitement around artificial intelligence, but also companies in completely different areas, including a US private equity firm and a French aerospace business. And in 2022, when markets fell sharply amid rising inflation and an energy crisis, ALW proved its worth by losing less than most passive funds and many of its peers, helped in part by its holdings in energy-related companies.

That same diversification does, however, come with a trade-off. When stock markets are heavily driven by a single investment trend, as they have been with AI since 2024, a broadly spread portfolio such as this can struggle to keep up. While ALW has maintained some exposure to AI-related companies, its managers have gradually dialled back some of the positions, growing cautious that these stocks have become expensive and the market’s expectations for them are exceptionally high.

That last point is worth sitting with for a moment. When expectations are very high, there is less room for disappointment, and if AI-related companies fail to deliver on their promise, their share prices could fall sharply. Funds that are heavily exposed to them would feel this most acutely – and that includes passive index trackers and ETFs, which by nature will have heavy weightings in the largest companies in the markets that they replicate. In that case, ALW’s more balanced approach may have cost it some performance in recent years, but we think it also means that its well-diversified portfolio is not as vulnerable to the dominant performance of a small number of companies that move in the same direction at the same time.

ALW brings together a range of managers, each with a distinct investment style, selected by the committee at Willis Towers Watson for their expertise in a particular area. Many of these managers are not readily accessible to everyday investors outside of a structure like this, which is part of what makes the trust a compelling proposition.

This is because the differences in investment styles can help create a smoother investment journey, as each manager’s approach tends to perform better under different market conditions. For example, managers focussed on higher-growth companies may perform well when investor confidence is high and markets are optimistic. In contrast, those who focus on well-established or defensive companies may hold up better during more uncertain periods. While most of ALW’s managers invest globally, some specialise in specific regions such as the US or Japan, where local knowledge and expertise can help uncover lesser-known opportunities.

Each manager is asked to pick up to 20 stocks, with a focus on companies’ lasting strengths and long-term potential rather than short-term market trends. Just as the managers are asked to take a long-term view, the committee also takes a long-term approach with its allocations, meaning changes to the manager line-up are relatively rare. These changes may happen if a manager leaves (e.g. due to retirement or a move to another firm) or if the committee identifies a stronger manager with a similar investment style.

Source: Willis Towers Watson

• May struggle when market returns are strongly dominated by specific trends (e.g. AI)
• Avoidance of bets on specific countries or sectors may result in missing tactical opportunities
• As an investment trust, ALW can use gearing, or debt, to invest, which can amplify both returns and losses