Alliance Trust Investor Forum Report

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Yesterday I attended the Investor Forum held by Alliance Trust in London. There were about 350 attendees with the usual audience of investment trust shareholders, many of whom had held the shares for a very long time from talking to a few of them. I pick out below some of the highlights (a full report of the meeting will be distributed to those who have registered for the Alliance Trust Shareholder Action Group (ATSAG – see ).

Chairperson Karin Forseke covered the changes announced by the company a few weeks ago – the objectives being to improve performance, reduce the discount and simplify the company structure. It is part of an on-going process she said (or as one shareholder said to me, perhaps a way to enable selling off the subsidiaries in due course).

She said the board is very committed to narrowing the discount to NAV and CEO Katherine Garrett-Cox noted later that the discount was 9.3% as on the morning of this event. It has reduced sharply after very considerable market purchases of the shares by the company in the last couple of weeks, which may not be coincidental of course.

In response to comments from a member of the audience, who clearly preferred tender offers to market share buy-backs, Karin Forseke said that the board has decided not to do a tender offer. This might disappoint Elliott Advisors also who allegedly wanted a large tender offer.

Both Forseke and Garrett-Cox emphasised the long term and above inflation growth in dividends – they have now risen for 48 years in a row. Unfortunately neither really covered the issue of investment policy which I still remain somewhat confused about and on which I was unable to get in a question to the panel. But I did manage to ask Evan Bruce-Gardyne (Investor Relations Manager) later about another issue that has troubled me. This is that it was spelled out by the speakers that Alliance Trust Investments (ATS) had been given under the new structure an investment management mandate with a fee of 35 basis points (0.35%) and hence overall costs in future are expected to be 0.45% of assets. I asked him what would happen if ATS continued to lose money, as it has historically, after billing the parent company for those fees. His answer was of course that as it is a wholly owned subsidiary those losses would be consolidated into the parent company. And would those losses therefore be included in the On-Going Charge as reported by the company and the AIC? His answer on this suggested not. Is this not a “smoke and mirrors” way of losing costs by this restructuring in the company as the investors in Alliance Trust Plc will end up bearing those costs?

The last speaker was Patrick Mills, head of ATS, who revealed that there is going to be a total replacement of the Alliance Trust Savings Platform during 2016. That will enable them to offer new services, and one of those will be the ability to lend against investors equity holdings. The fact that they have a banking licence will also enable them to offer deposit accounts. It would seem that Alliance Trust shareholders in addition to investing in a Global Investment Trust, a stockbroking/savings platform business (ATS), and a fund management company (ATI) are in future to be also invested in a bank!

Is that a positive development for the future? Answers to the writer please.

Roger Lawson 

  1. Stephen Burke says:

    A few comments:

    The target of the world index + 1% doesn’t seem to mean a lot because the portfolio construction doesn’t seem to be taking it into account. They were pushing the recent outperformance, but it seems that may just be down to being underweight in emerging markets. If EM stages a big recovery they will presumably underperform, but it’s not clear that will have any consequences. Basically they aim to invest in good-quality companies (doesn’t everyone?) and just hope that that will end up outperforming the index. I got the impression that KGC herself was unconvinced by having such a “target”.

    The comment about running down private equity was revealing, basically that ATI no longer has a PE team. So why not outsource to someone who does?.My conclusion would be that ATI is still an in-house manager in reality, not an arms-length contract.

    The “socially-responsible investing” concept seems to me just to be a marketing tool – to the extent that it has real investment implications there’s nothing preventing any fund manager from taking them into account.

    In the break I asked an ATS person if the need to make it profitable would limit the possibility for investment, i.e. which takes priority. He said that they would invest if necessary regardless of the impact on profits. It seems that we will soon get some big changes in the ATS platform, so it’ll be interesting to see how that goes.

  2. Stephen Burke says:

    One other thing – the event was well-organised in general, but their forecasting ability clearly doesn’t extend to predicting how many sandwiches their investors might eat!

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