A market rotation in equities has impacted the performance of Alliance Trust’s equity portfolio in the past six months, resulting in a net asset value total return of 0.3 per cent for the six months to June 30, compared with an AIC Global Sector total return of 1.6 per cent.
The interim results from the company noted the total shareholder return of the trust was slightly higher at 0.4 per cent, but stated: “The performance of our growth-oriented equity portfolio was impacted by market rotation in favour of ‘value’ stocks, as well as some stock-specific underperformance, which has been actively addressed.”
In the statement Alliance Trust explained that in the portfolio relative performance had been “adversely affected” by the strong performance of “value” stocks with low price/earnings and price/book ratios relative to “growth” stocks, but in spite of this it noted the 2014 dividend is expected to increase by 3 per cent to 9.834p per share.
The fixed income side fared slightly better than the equities, with the total return from this part of the portfolio recorded at 3.1 per cent. Although Alliance Trust noted it had reduced its fixed income exposure from 7.6 per cent to 6.6 per cent by reducing its holding in the Alliance Trust Monthly Income Bond fund.
Meanwhile the company’s asset management subsidiary Alliance Trust Investments (ATI) saw assets under management increase by 2 per cent in the six months, while it reduced its operating loss by 5 per cent to £1.6m as it controlled expenditure and saw an increase in third party revenue.
ATI recorded net inflows of £81m from both institutional and retail investors, with strong inflows into its Monthly Income and Dynamic Bond funds in addition to its Sustainable Future Fund range.
The platform part of the business, Alliance Trust Savings, also grew assets under administration by 10 per cent to £5.9bn during the period, although it also reported an operating loss of £0.4m, which it attributed mainly to “investment we have made in the intermediary channel, the phasing of marketing spend and a reduction in direct customer numbers as a result of consolidation and attrition following our recent pricing changes”.
Katherine Garrett-Cox, chief executive of Alliance Trust, said: “Over the past six months, equity markets have favoured ‘value’ stocks, as opposed to the ‘growth’ companies towards which our equity portfolio is more heavily weighted. We have also seen some stock-specific underperformance in our portfolio and have taken steps to address this, selling out of certain holdings and increasing our position in those where we have a higher level of conviction in the investment case.
“Our focus remains on generating returns for shareholders over the medium to long term through a combination of capital growth and a rising dividend.”
