Following the Annual General Meeting of Alliance Trust (ATST) where the Board conceded the appointment of new directors subsequent to the requisition by Elliott Advisors, ShareSoc has been encouraged by a number of private investors to support a shareholder action group to represent their interests. Many investors still have concerns about the strategy of the company and about some aspects of its operations.
A shareholder action group has therefore been launched and investors can register their interest on this web page: https://www.sharesoc.org/alliance.html
A couple of comments on the summary of the situation:
“The risks associated with the ATS subsidiary are being shouldered by the Trust’s shareholders without any compensating rewards.”
This is not exactly true – shareholders who use ATS (which includes me) clearly do have a compensating reward. Is there any information on what fraction of individual ATST shareholders use ATS? I would think it’s fairly high but I don’t know. On the other hand, ATS probably needs to expand its client base to be profitable so the connection is likely to reduce over time.
“Sale of ATS to a larger competitor.” – I’m not sure that “competitor” is the right word, e.g. JP Morgan has no directly comparable trust. Also I seem to remember that several other fund managers recommend ATS rather than providing their own platform – indeed Standard Life has only just announced that it will switch its IT savers to ATS. Presumably those companies have an interest in its future development. It may also be reasonable for ATST to retain a stake in an independent ATS.
“If costs and performance continue to be inferior to third party alternatives the Trust should cease to be self managed and a management contract awarded to an organisation with an excellent track record and a risk profile similar to that traditionally associated with Alliance Trust.”
The Witan model would also be a possibility, i.e. retaining asset allocation in house but contracting out the management of sub-portfolios.
I believe only a minority of investors in Alliance Trust shares use ATS (and that’s excluding the institutional investors), but I gather there is some overlap between those on the register (i.e. have a direct holding) and those who hold shares via ATS. But it might be difficult to give any exact answer to your question – not even sure Alliance know.
There are a number of other “Global” investment trusts – you can get a list from the AIC web site here: http://www.theaic.co.uk/aic/find-compare-investment-companies?name=&tidm=&az=§or=Global&manager=&country=®ion=&objective=&op=Filter&sort=&form_build_id=form-mT5CGXrYu_Lpk_WWLLEckbMcGk1mC4H4XDfdKOIDVq0&form_id=aic_data_search_form
And is not JPMorgan Overseas a comparable trust?
But there are clearly quite a number of options in terms of future strategy and we are not as yet pushing for any particular options to be followed.
I think having a low cost savings scheme for Alliance Trust shares made a lot of sense when stockbrokers’ fees were high (and often fixed). But now every man and his dog provides low cost stockbroking services so I am not clear Alliance Trust gain much advantage from that any more other than trying to lock their clients into some kind of nominee service. There is surely not much advantage for their clients in supporting investment in other trusts or shares. Where’s the competitive advantage in doing so? Is it really that much lower cost from doing it in Dundee versus Edinburgh, the north of England (Halifax) or wherever? Certainly ATS fees do not look particularly competitive to me. And there have been comments that it’s not a great service technically anyway. Stockbroking is a very competitive area at present, with few barriers to entry. How are ATS really going to expand this service profitability, and without spending a lot of money? There are so many questions here that the board has not really answered. I don’t necessarily expect the board to disclose all their business strategy publicly, which should remain confidential, but as they have lost a considerable amount of money in ATS over the years, you can see why shareholders in Alliance Trust are concerned as most of them bought shares in an investment trust, not shares in a stockbroker.
I would think that Alliance must know how many people hold shares in ATS, and presumably Elliott do too since I got a mail shot from them. At any rate I wouldn’t personally support anything which damaged ATS, or indeed moved them away from the flat fee model, given that that would harm me more than a small improvement in the discount would benefit me.
My point about competition is that I don’t think other management groups would necessarily view Alliance as a competitor in any direct sense, perhaps apart from Foreign & Colonial. Also their individual attempts to develop platforms have been fairly poor – from personal experience the JPM platform doesn’t work very well and Henderson contract out to Halifax which is even worse.
The stockbroking part may well not be particularly special in itself. I invest in the SIPP, and that’s a different matter. There are relatively few SIPP providers, probably because the regulatory hurdles to jump are quite high, not to mention the effort of keeping up with constant changes in the rules. After recent increases the SIPP annual fees are similar to Hargreaves Lansdown and Barclays, who are probably the two biggest competitors. However, both of those have additional, largely unlimited, charges for holding unit trusts and OEICs because of their history of taking commission. ISAs are in a somewhat similar position although there are more providers. The fallout from RDR is still ongoing and it may be that other providers will change, but right now ATS does have a competitive advantage for certain kinds of investors (people with large portfolios based on a mixture of funds).
Technically the platform is a bit quirky due to the rather idiosyncratic way the pre-internet system worked, but generally I find it works OK for my needs (I’m largely a passive investor). However, the interface doesn’t seem to have evolved much lately which makes me worry that they may be holding back from investment in an effort to reach profitability quickly, which in the long run will be self-defeating.
I don’t entirely agree that people didn’t know they were investing in a stockbroker. ATS goes back to the start of PEPs and used to be much more heavily subsidised, although ATS clients were required to be shareholders until fairly recently. In many ways ATS has been the USP for Alliance – certainly in my case it’s the reason I became a shareholder. If you just consider the trust itself there has never been much reason to buy it in preference to the other large generalist trusts.
I will be posting something on this later today. Roger Lawson
No doubt you have seen the announcement of the takeover of Brewin Dolphin’s Stocktrade by ATS. It therefore seems less likely now that ATS will be divested, and Alliance turned into a pure IT, as they’re pressing ahead and building scale in the business.
However, my interest in this is as a Stocktrade Personal Crest account holder. I wonder whether that service will be continued by ATS? It would be very regrettable if it wasn’t, as of course another of Sharesoc’s campaigns is for more direct shareholder involvement and at the moment the personal crest account is the only option for those who don’t want paper certificates.
Anyone who uses ATS for any reasonable sized portfolio should now go out and *buy* Alliance Trust shares specifically to vote *against* any changes to ATS.
As an individual investor, fees are one of the few things you have control over. It’s the *only major* platform that is flat-fee focused SIPP and ISA – the larger players will charge significantly more and be a real drag on performance.
On the specifics. The half-year results say that on a like-for-like basis they lost 200k GBP (due to marketing), while increasing the business by 12% in the period. Compared to last year they increased revenue by 500k (6.2M to 6.7M) – on the full results of last year they made an overall profit of 1.1M. Further, they expect to increase assets under management by 60% following a purchase – this caused the additional loss of 0.8M – though the acquisition should drive further transactions and consequently revenue. Finally, ATS is barely a speed bump in their total business – it shouldn’t even be worth talking about if the trusts performance is the issue!
You can read the results directly at: http://www.alliancetrust.co.uk/pdfs/interim_report_2015.pdf
The only people who benefit from shutting down ATS are the finance industry competitors.
I don’t think anyone particularly wants to shut down ATS – just have it owned and run by someone else as its losses detract from the core Alliance Trust investment trust business and must consume a lot of management time. At present a lot of investment (i.e. cash) is going into ATS in an attempt to gain scale and make it more profitable but it’s beginning to be the tail that wags the dog.