Pressure mounts on Alliance Trust

Investment Adviser has backed the motions which, if voted for by a majority of shareholders at the April 29 annual general meeting, would see three experienced new independent non-executive directors added to the board.

Several more investment managers and commentators have backed the stance.

James Calder, research director at discretionary manager City Asset Management, said the company would be “voting in favour of the motions”.

“The trust has been a serial underperformer for a number of years,” he said.

“Peers have had performance issues, too, but they have looked at changing people at the top or doing something about it.”

Mr Calder said activist shareholders were often looked upon with scepticism, but “Elliott seems to be a bit more forward thinking and has the moral high ground”.

“It also appears the three nominees are very independent from Elliott so there is no issue there,” he added.

Devon-based adviser Philip Milton, who runs Philip Milton & Co, said he used to hold “big chunks” of Alliance Trust.

“I regret to say I didn’t have it for the investment prowess of the team, which I didn’t really rate very highly,” he said.

“We held it as a discount play and did very nicely on it as a proxy for a global portfolio at such a discount. With hindsight the discount narrowed, we suspect, as Elliott was increasing its stake.”

Mr Milton said one of the trust’s “biggest failings” was not increasing its gearing at “the depths of the despair in 2009 when it could have done so, and really cheaply”.

“If it had done, perhaps now it wouldn’t have the trouble as it would have outperformed easily,” he added.

James Floyd, European director at Brook Green Capital, said he “very much agrees with the motion”.

“We think three new non-executive directors would be a very good move,” he said.

“The Alliance Trust position of getting investors to vote against it is short-sighted and aimed at keeping the status quo.”

Mr Floyd’s company markets overseas asset managers’ funds in the UK and places them on the Alliance Trust Savings platform for distribution. This was his reason for taking an interest in the debate.

“I believe their appointments would improve things,” he added.

A Cornish-based private investor, who requested anonymity, said he had already voted for the appointment of the three non-executives.

He said the trust had “not been as competitive as it should be” and that a “shake-up could only be a good thing”.

A spokesperson for Alliance Trust said it had received numerous messages of support from shareholders who had voted against the nominees, including comments such as: “I am very happy with the way the trust is run and I can honestly say it has never let me down yet”.

The spokesperson added the trust’s aim was to deliver “strong and sustainable investment performance” in the longer term, adding its new investment approach had borne fruit in its first six months.

“Our total shareholder return ranks in the top half of the Global sector a) for the last year (17 per cent), b) since we became aware of Elliott’s shareholding four years ago (60 per cent) and c) since Katherine Garrett-Cox became chief executive (92 per cent).

“Alliance Trust has also delivered an unbroken track record of dividend growth over the past 48 years, including 14 per cent growth in 2014, and our share price reached an all-time high earlier this year.”

With the trust AGM due on April 29, what happens now?

With the Alliance Trust annual general meeting taking place on April 29, the next few weeks will be dominated by the trust and Elliott Advisors each attempting to sway as many investors as possible to their respective causes.

Following a relative lack of action last week, given that the period just after the tax year-end tends to be a quiet one, meetings will now be taking place between major shareholders and the two parties, which will prove key as many shareholders have still yet to decide which way to vote. This week looks set to be busy for both Elliott and Alliance. Proxy votes will have to be sent off to arrive by 11am on April 27, so many of the major decisions will be taking place in the coming days.