Alliance Trust is to introduce a clearer investment mandate, lower costs and bring in a simplified management structure in response to shareholder concerns.
The company said its board will “become fully independent, consisting solely of non-executive directors” as part of the overhaul.
Katherine Garrett-Cox will continue as chief executive officer and a director of asset management arm Alliance Trust Investments (ATI), but will step down from the trust’s board.
The changes follow the recent battle with activist shareholder Elliott Advisors ahead of the trust’s annual general meeting (AGM) earlier this year.
Separate independent boards will also be established for ATI and Alliance Trust Savings, with Susan Noble retiring from the board of Alliance Trust to become chair of ATI, once the changes take effect.
In addition the trust’s chief financial officer, Alan Trotter, is leaving the company “having completed the work associated with the changes announced”.
Meanwhile the trust also announced it planned to “increasingly focus on global equities and will dispose of its fixed income, legacy mineral rights and property assets as soon as practicable”. The trust’s relatively small exposure to private equity will also be reinvested into the equity portfolio as these assets mature over the next few years.
It stated: “This simplification of the trust will give greater clarity to its investment proposition.”
Alliance Trust said the changes are intended to take effect “as soon as practicable” but no later than March 1 2016, subject to ATI obtaining relevant regulatory permissions under the AIFM Directive.
In addition, the investment trust announced the investment management mandate has been awarded to Alliance Trust Investments “on standard industry terms” to introduce a significantly greater level of accountability. The cost of the new investment management arrangements will be 35 basis points (bps) on average net assets.
The trust’s board said it had reviewed the most appropriate arrangements for the investment management including alternatives to self-management, but had concluded the best interests of the shareholders were served by continuing with the equity investment team appointed in September 2014.
It added that while it was confident in the ability of the team to deliver returns the board planned to establish a management engagement committee, to be chaired by recently appointed non-executive director Karl Sternberg, to review investment performance regularly.
The board added: “In the event that performance does not consistently deliver against the new benchmark, a full review will be undertaken and external managers considered.”
Other changes announced as part of the overhaul included the targeting of an ongoing charge of 45bps or less by the end of 2016, compared to the 60bps recorded in 2014, and a “significant cost reduction programme” to deliver savings of £6m in 2016.
It revealed: “The anticipated timetable for Alliance Trust Investments (ATI) to achieve profitability will be accelerated through a combination of a cost reduction programme as well as a focus on continued growth of third party assets. Anticipated cost efficiencies, of around £6m per annum, are equivalent to more than 20 per cent of the combined recurring asset management costs borne by Alliance Trust and ATI in 2015. ATI is expected to achieve monthly profitability by the end of 2016.”
Karin Forseke, chair of Alliance Trust, said: “The actions announced today, taken together, represent some of the biggest changes in our history and are designed to further improve shareholder value. They will provide our shareholders with an investment trust which aims to outperform a clear benchmark from a cost base which is among the lowest in the sector.”
