Alliance Trust shake-up will align company with industry

Alliance Trust shake-up will align company with industry

Alliance Trust’s radical shake-up of its business has been branded “sensible” and will align the company with the rest of the industry, experts have said.

Yesterday (15 December), Alliance Trust announced it will embark on a major overhaul of the business which will see it ditch its investment arm.

Rival group Liontrust has agreed to buy the Alliance Trust Investments business for as much as £30m.

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The rest of Alliance Trust’s portfolio, comprising £3.5bn assets, will move to an outsourced 'manager of manager' model - run by institutional consultants Willis Towers Watson - in a bid to improve performance.

Jason Hollands, managing director at Tilney Bestinvest, said Alliance Trust had been "highly unusual" in owning an in-house asset manager.

“Alliance Trust had certainly been out of step with the rest of the industry in retaining a whole-owned fund manager rather than appointing external managers."

He said this previous model was at risk of creating conflicts of interest, particularly since the board is meant to look after the interests of shareholders and monitor the fund managers.

“The real question is whether they might go ‘full Monty’ at some point and move the entire mandate, or partially outsource beyond Alliance Trust Investments," he said. 

Mr Hollands also pointed out that over the years other trusts have moved away from a single manager model to a partial or wholly 'manager of manager' basis with varying degrees of success.

“I think most investors will want to wait and see how this develops.”

"Separating the trust and appointed investment manager is good corporate governance," he said, adding the creation of a manager of manager approach is recognition that most asset managers are not strong across the board.

Alliance Trust will be giving Willis Towers the task of appointing eight underlying fund managers, each of which will run a concentrated 'best ideas' fund in order to reduce the risks associated with a concentrated portfolio.

But Mr Hollands said: “Time will tell whether this new approach will be successful, and there will be much interest in who the underlying managers selected by Willis Towers Watson are.”

Richard Troue, head of investment analysis at Hargreaves Lansdown, said: “It is encouraging to see the board take further steps to improve performance, but it is a shame it has taken so long to get this far. 

He also said many of the proposals seemed “sensible”, adding: “As always, the proof of the pudding will be in the eating and the success of the strategic review will be measured by the trust’s performance in the coming years.”

“Change always brings with it disruption, so investors comfortable with the outcome of the strategic review should be willing to take a long-term view in order to benefit fully from the changes.”