Elliott Advisors takes stake in British Empire Trust

Elliott Advisors takes stake in British Empire Trust

British Empire is under pressure to address its discount after activist investor Elliott Advisors bought a stake in the investment trust.

Elliott Advisors now holds a 5 per cent stake in the trust. Numis said the purchase was likely acquired as a result of Aviva Investors continuing to sell down trust holdings.

The firm is known for its activist approach to its holdings, most notably its 16 per cent stake in Alliance Trust. Elliott brought about a overhaul of the trust last year which led to several resignations, including that of chief executive Katherine Garrett-Cox.

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British Empire could now face pressure to address its 13.6 per cent discount and deliver strong NAV performance, according to Charles Cade, head of investment companies research at Numis Securities.

“While the stake is currently small, there is clearly a threat that Elliott could add to its holding if the discount remains in double-digits,” Mr Cade said.

“We believe the fund has an interesting and differentiated mandate, but its value style has been out of favour, and exposure to Asia/emerging markets and commodity stocks has not been helpful [until recently].”

The trust has underperformed in recent years, delivering 18 per cent returns over the last five years compared to 56.1 per cent for the MSCI AC World and 20.7 per cent for the MSCI AC World ex US.

Though the investment approach has remained unchanged, Joe Bauernfreund took over from John Pennink as lead manager in October last year and increased the concentration of the portfolio.