Alliance Trust’s shift to a multi-manager model could yet be scuppered by renewed criticism from activist shareholder Elliott Advisors, broker Numis has suggested.
The £3.3bn investment trust is set to move away its current approach and has appointed consultancy Willis Towers Watson (WTW) to establish an eight-strong multi-manager strategy.
Having first announced the plan in December, Alliance Trust announced this morning that Ben Whitmore from Jupiter and Hugh Sergeant of River & Mercantile (R&M) were among the eight managers chosen by WTW.
However, Numis analysts David McCann and Charles Cade said approval for the change was far from guaranteed.
They said: “[The mandates remain] subject to the change of corporate strategy at Alliance Trust being approved by its shareholders, which we understand is far from a certainty given the opposition from a number of shareholders.”
Mr Cade said he suspected Elliott Advisors, the hedge fund which has a stake of just under 20 per cent in the trust, did not back the plan.
“Elliot currently holds around £630m of shares so it won’t rush into anything. My suspicion is that Elliott is against [the change],” Mr Cade added.
Additional hurdles may also need to be navigated, according to Numis’ investment companies team. In the event that the deal goes through, dissatisfied shareholders such as Elliott could push for an exit via a share buyback, potentially bringing the trust down in size from £3.3bn to £2bn.
The ability for Elliott to exit may be hampered by the fact the trust trades on a discount to NAV, however. The discount currently sits at 5.3 per cent.
Clare Dobie, a non-executive director at Alliance Trust, said today (January 16) the board did not anticipate difficulties in gaining approval for the changes at a general meeting on February 27.
“We are extremely confident – and now we have the details and can point to the impressive track record of WTW it should give shareholders a lot of confidence and a lot of reason to support the vote,” she said.
Alan Brierley, of Canaccord Genuity, said he expected the vote to be passed.
”This move has scope for Alliance Trust to finally gain traction among retail investors," Mr Brierley added.
But Elliott's decision could be crucial given the hedge fund's history with Alliance Trust. The trust's overhaul follows a strategic review which began last June, a year after the company first came under pressure to reform from Elliott.
A fierce battle in 2015, prompted by the activist's accusations of underperformance, eventually saw the company admit defeat and appoint a number of external directors to its board. Chief executive Katherine Garrett-Cox and chair Karin Forseke subsequently stepped down from the company.
