Following consultation with its shareholders, Alliance Trust has announced a raft of measures that the board believes will position the company to “deliver consistent outperformance in a cost-effective manner”. These include changes to the board structure, changes to the management arrangements, focus on cost reductions, disposal of legacy assets and a new benchmark. The board believe the new measures should improve performance and narrow the discount. However, they have committed to use share buybacks, as required, to narrow the discount into single figures.
Last year saw the appointment of a new equity investment team to manage a “high quality global equity portfolio” designed to generate growth in both capital and income, with a strong focus upon sustainability. Moving forward, the trust will focus on global equities and will be disposing non-core investments (fixed income, legacy mineral rights and property assets will be disposed of as soon as practicable). The mandate to manage the trust is be awarded to Alliance Trust Investments (ATI) at a rate of 35bps on average NAV. The board cites the performance of the new global equity portfolio as a key reason to continue with the current arrangements (it has outperformed the MSCI ACWI by 2.3% gross since the new team took over management in September 2014 – with stock selection being a major contributor). However, the board has said that it is open to the option of moving to an external manager or managers as an alternative to self-management in the future.
The trust is getting a new benchmark, the MSCI All Country World Index, and the board has said it will be establishing a Management Engagement Committee to review investment performance regularly. In the event that performance “does not consistently deliver against the new benchmark”, they have said that a full review will be undertaken and external managers considered.
The trust is now targeting an Ongoing Charges Ratio of 45bps or less by the end of 2016 (60bps in 2014). They have reportedly identified £6m of cost reductions for 2016.
The board is also to become fully independent with solely independent non-executive directors. As such, Chief Executive Katherine Garrett-Cox (pictured) is to step down from the board of Alliance Trust. Separate boards will be created for Alliance Trust Investments and Alliance Trust Savings. The creation of a separate board for Alliance Trust Investments will allow for the necessary separation of shareholder and investment manager interests. Susan Noble will become Chair of ATI and, as a consequence, will retire from the Board of Alliance Trust PLC when the new arrangements take effect.
Katherine Garrett-Cox will continue as Chief Executive Officer and a director of ATI and will step down from the Board of Alliance Trust PLC. Alan Trotter currently the chief Financial Officer is leaving Alliance Trust.
Major shake up at Alliance Trust : ATST