Alliance Trust Shareholder Aaction Group (ATSAG)

This campaign was launched in May 2015 subsequent to the proxy fight by Elliott Advisors to appoint three new directors to the board of the company. ShareSoc supported Elliott and published a press release and a further note on the issues they had raised – see Alliance-Press-Release. Although the board conceded defeat by accepting two of the Elliott nominees and the appointment of another director, several private investors approached ShareSoc as they still had further concerns about the future strategy and operations of the company.

This Campaign is now closed.


Until over a decade ago, Alliance Trust was a conservatively managed, low cost, investment trust which was focused on its investment trust activities and performed satisfactorily relative to its benchmark and its peer group. Subsequently it lost its focus, its performance was unsatisfactory and its costs escalated at an alarming rate.

The Board also embarked on a new venture, the management of third party funds through a wholly owned subsidiary of the Trust, Alliance Trust Investments (ATI). This venture was loss making and these losses were being borne by the Alliance Trust’s shareholders.  Less visible were the risks associated with this venture, risks which were being shouldered by the Alliance Trust’s shareholders without any compensating rewards.

A more long standing subsidiary, which was first established in the 1980s, is Alliance Trust Savings (ATS) as a savings scheme for investment in Alliance Trust but is now a generic investment platform.  This savings platform was claimed to be profitable at the operating level at the AGM in April 2015 but actually lost £3.3 million after non-recurring charges and impairments. The risks associated with the ATS subsidiary are being shouldered by the Trust’s shareholders without any compensating rewards.

The governance of Alliance Trust was questionable for two reasons.  First, it was a self managed Trust which can inhibit the strategic options available to the company. Consequently the Board has tended to focus on supporting the status quo rather than on exploring outsourcing options.  Second, two of the members of the Board were executives of the Trust and were in a chronically conflicted position.  Specifically, any meaningful debate on outsourcing the management of the Trust to a third party was constrained as to do so implied a lack of confidence in the current management’s ability to deliver satisfactory results.

The decision to fight the requisition by Elliott Advisors in the way chosen, which was surely unwise and resulted in very high costs of £3 million imposed on shareholders, was a symptom of attempting to defend the status quo.

To summarise the key issues were:

a) persistent under-performance relative to benchmark.

b) inflexibility of the Trust’s self managed model.

c) high costs relative to peer group and relative to historical costs (and we question whether the reported “On-going charges” figure accurately reflects the real costs).

d) high remuneration of the directors in comparison with similar companies.

e) persistent and high share price discount to net asset value.

e) losses being incurred in the subsidiary companies, and an apparent desire to expand those operations very substantially effectively turning the company more into a financial services business than a simple investment trust.

Changes that the board might have considered

The actions that the board of directors of Alliance Trust might have considered were:

1. A reorientation away from expansion and a re-focusing of management’s attention on to the performance of the investment trust.

2.  Sale of ATS to a larger competitor.  ATS lacks scale and scale is required to achieve profitability.  Divestment would also remove the risks being shouldered by Alliance Trust’s shareholders.

3.  Abandoning the management of third party funds. ATI should be divested or wound down to eliminate a loss making activity and remove the risks being borne by Alliance Trust’s shareholders.

4.  A radical pruning of costs.  The multiplicity of offices in Dundee, Edinburgh and London surely adds to the costs for example.

5. Adoption of a specific policy and plan to deal with the high discount to NAV.

6.  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.        

This Shareholder Action Group urged the board to take action to review the strategy of the company and consider the issues listed above.

Note that we represent shareholders who between them hold more than 3.8 million shares.

Update 1: On 14/5/2015 Alliance Trust announced the acquisition of the Stocktrade operations of Brewin Dolphin. ShareSoc Director Roger Lawson posted some comments on this and allegations by Katherine Garrett-Cox of sexism over her remuneration in this blog post.

Update 2: 24/7/2015. Some comments on the half-year results are present in this document: Update 2

Update 3: 1/10/2015. ShareSoc/ATSAG issued this press release following the announcement by Alliance Trust of “changes to enhance shareholder value”: Press070 . In summary we do not believe the changes will resolve the problems in the Trust in short order, if at all, and that seemed to be the view of many shareholders and most of the media so this campaign must continue to press for action.

Update 4: 3/11/2015. There is a brief report on the Alliance Trust Investor Forum held in London in this blog post:Investor Forum. A full report has been sent to registered campaign supporters.

Update 5: 27/11/2015. The company announced that Chair Karin Forseke was stepping down in the new year. Roger Lawson wrote this blog entry on the topic: Update 5

Update 6: 9/12/2015. This note was issued to supporters to give ATSAG’s analysis of the current position of the company and our conclusions about what else needs to be done: Update-6

Update 7: 7/1/2016. This note was issued containing further information: Update-7

Update 8: 15/02/2016. Alliance Trust have announced the departure of Katherine Garrett-Cox. This blog post gives some comments on the event.

Update 9. 9/3/2016. This note was issued to our supporters summarising the Annual Results announcement from Alliance and giving our comments: Update-9

Update 10. 29/3/2016. Some voting recommendations for the AGM and comments on remuneration are in this note: Update-10

Update 11. 8/5/2016. A report on the Annual General Meeting has been posted on the ShareSoc Blog here.

Update 12. 30/5/2016. See this blog post for a possible merger with RIT Capital and the appointment of a new director.

Update 13.  15/12/2016. Alliance Trust have announced the conclusions of their strategic review. The major change is the decision to outsource the investment management and dispose of the ATI subsidiary. ATSAG is supportive of the proposed changes. See this document for more information: Update-13.

Update 14.  17/1/2017. This note was published  giving the latest news and some comments on the new investment strategy: Update-14.

Update 15.  27/1/2017. A report on one of the Shareholder Forum Meetings held by the company and the subsequent news on repurchase of Elliott’s shares is contained in this blog post: Forum-Meeting

Update 16.  6/2/2017. ATSAG and ShareSoc are recommending that shareholders vote IN FAVOUR of all the resolutions at the General Meeting on the 28 February. Our reasons are given in this blog post: Voting-Recommendations and in the press release we subsequently issued – see Press088

Update 17.  28/2/2017. Alliance Trust vote at General Meeting – all resolutions passed – see this blog post for summary Vote-Passed. A significant victory for private investors! A report on the General Meeting is present in this document: Update-17 . This press release was also issued: Press090

Update 18. 02/8/2017. Some commentary following publication of the interim results: atinterims1708

Further news on this campaign will be posted here as it arises.