The chairman of the top-performing £1.5bn Witan Investment Trust has warned investors that valuations are now full, meaning picking investments will become trickier.
Harry Henderson said equities had been “calm on the surface” throughout 2014 but sector performance had been changeable as investors “booked gains on the winners of 2013” – notably mid and small caps – and sought value in areas that had lagged.
“The mild euphoria at the end of 2013 has dissipated, while earnings reports and economic growth have improved the fundamental foundations for equities,” he said.
“However, there is less of a safety margin from valuations, which generally appear full, rather than cheap. The need for selectivity is consequently greater.”
The trust, a member of the Investment Adviser 100 Club of top-performing funds, saw its share price rise 6.9 per cent in the six months to June 30 compared with a rise of 2.3 per cent for its composite benchmark, which consists of 40 per cent UK, 20 per cent North America, 20 per cent Europe (ex UK) and 20 per cent Asia Pacific.
It uses a mixture of investments in third-party funds – 11 at present – and some direct equity holdings.
The trust has outperformed its benchmark in one, three and five-year periods and in seven years was beaten only by the FTSE North American index portion of its benchmark, according to data from FE Analytics.
Elsewhere, Mr Henderson said the outlook for economic growth was improving but the good news was “unevenly distributed”.
“The UK and the US appear most clearly set on a recovery path but European growth remains fragile, in spite of the looser monetary policy recently adopted by the European Central Bank,” he said.
“The current conflict in Ukraine adds an unpredictable factor, given concerns over the possible Russian threat to Ukraine’s borders and the prospect of continued economic sanctions.”
