The rather unsettling showdown between Alliance Trust and the US hedge fund Elliott Advisors, should alert the entire industry to so-called activists investors.
With a 12 per cent share in the trust, it looks to outsiders as if Elliott Advisors is not only seeking to place its own people on the board with the expressed intention of driving up value, which is a good thing, but there may also be a hidden agenda.
Although the 12 per cent holding that Elliott Advisors has in its own right and on behalf of clients, the other 88 per cent of shareholders still have an important say in the outcome. The activist investors are questioning Alliance Trust’s strategy and performance and it is not the only one to raise these questions. But it has also said that since 2011 the firm has been in talks with senior executives from Alliance Trust so we are left to believe that these talks have got nowhere, or that Elliott Advisors remains vigorously opposed to the answers it has received.
Even so, Elliott Advisors’ reported intentions also look very short-termist and, although we may be wrong, do not appear to be in the best long-term interest of the other investors.
On the face of it, it looks as if Elliott Advisors have raised fairly reasonable questions: about investment performance, internal management structure, loss-making subsidiaries and have made suggestions for improvements. This observation aside, it is a bit disquieting that the institutional shareholders are as silent as Trappist monks.
Who are these institutional investors? Are they occupational pensions, insurance companies, charities or family offices? There is another principle at stake and that is diversity.
Unless they speak up, many people will be left with the impression that Elliott Advisors is the infantry for a brigade of institutional investors who enjoy the battle.
This sparring has the making of a massive legal battle somewhere down the line, maybe in a New York Federal Court.
It is time for cooler heads to be involved.