Divisions over Alliance Trust as vote proceeds

Divisions over Alliance Trust as vote proceeds

Advisers and analysts were disagreeing over the performance of Alliance Trust as it headed to a controversial vote at the time of going to press on whether to add three non-executive directors to its board, as demanded by shareholder Elliott Advisors.

Ben Willis, head of research for Bristol-based Whitechurch Financial Consultants, said performance over one, three and five years had improved, and costs had become slightly lower than those of some of its peers.

He said: “Plenty of the trust’s rivals have fared better and are trading on much lower discounts. Having said that, the trust’s charges are keen when compared to its peers.”

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Over the past decade the trust had returned 124 per cent, with dividends reinvested on a net asset value basis.

However, Laith Khalaf, senior analyst for Bristol-based Hargreaves Lansdown, said this was still lower than the 150 per cent return from the MSCI AC World Index, which he called an appropriate benchmark.

National advisory firm Tilney Bestinvest announced it would back Elliott Advisors, although Brewin Dolphin, another shareholder, was set to make its decision public on the day of the vote.

In a trading update for three months to 31 March 2015, Alliance Trust revealed Nav total returns of 7.9 per cent over three months, 14.6 per cent over six months and 18 per cent over one year.

It achieved a Nav total return of 43.3 per cent over three years, 53 per cent over five years and 71.3 per cent over seven years.

Paul Locke, an analyst for Investec, warned that the vote would not solve Alliance Trust’s problems.

He said: “A vote against the new directors will leave a large, disgruntled shareholder on the register and questions over whether a tender will take place.

“Should the new directors come onto the board, uncertainties remain over their impact on the ultimate direction of the trust and the timing and scope of any change.”

Nav total returnThree monthsSix monthsOne yearThree yearsFive yearsSeven years
Alliance Trust7.9%14.6%18%43.3%53%71.3%
Global sector7.4%12.1%16.1%45.6%57.6%70.6%

Source: Alliance Trust and Morningstar as of 31 March 2015

The views came as different investors set out their stall.

A spokesman for DC Thomson and Co, a publisher with a 5.52 per cent holding in Alliance Trust, said: “While we welcome open debate, we see nothing in Elliott Advisors’ proposals to persuade us, as long-term investors, to give them our backing, and we intend to vote against their resolutions to nominate new directors.”

Right to reply

An Alliance Trust spokesman said: “Alliance Trust is proud of its track record of delivering strong shareholder returns over both long and short-term horizons. Alliance Trust has delivered these returns without exposing our shareholders to excessive risk.

“The company has created and protected investor wealth for generations and has delivered an unbroken and almost unequalled track record of increasing dividends for the past 48 years.”