Long awaited changes at Alliance trust fall short of expectations


#1

Originally published at: http://whichinvestmenttrust.com/long-awaited-changes-at-alliance-trust-fall-short-of-expectations/

The Board of the Dundee based trust has announced sweeping changes that include a radical new investment process, but is it enough to ward of hostile action? Fast Facts Move to become a multi-manager global equity trust Investment consultants, Willis Towers Watson responsible for appointing around eight external managers Will target 2% outperformance of MSCI…


#2

This is clearly going to be compared to Witan, which is the best multi manager fund in my view, but it’s interesting that they’re targeting a lower cost than Witan, when Witan is widely recognised as being low cost for a multi manager. I wonder if they’ll be tempted down the road of passives to achieve their cost target.

Selling ATI is a good move in my view though I’m glad they have held on to ATS. Being an investment trust owning what is probably the largest investment trust platform business useful for the industry.


#3

So one minute they’re a focused 50 stock portfolio, the next minute they’re moving to a 200 stock portfolio because 50 stocks was too risky.

I thought modern portfolio theory suggested 20-25 stocks was all you need to achieve diversification.

I would have preferred if one of the larger groups such as Baillie Gifford, Aberdeen, Henderson, Schroders or even Edinburgh Partners had got this gig. Settling on pension fund advisors is surely going down the road of investment by compliance committee.

I am not minded to go along with this and as it is, unless I hear more to change my mind I will likely vote against these proposals at the AGM.

The only thing I like about it is the disposal of ATI and the retention of ATS. Many Alliance Trust shareholders use ATS so despite some analysts calling for its disposal, ordinary shareholders will oppose any move to do so.


#4

The changes they’re proposing are a surprise, and a little unexciting. No one else in the investment trust world has gone down the route of selecting pension advisers to run the investment portfolio.

I am prepared to give them a chance though. If they achieve the level of outperformance they are targeting I’ll be happy with that. The issue is we’ll have to wait for three and a half years before we find out.

If another group comes forward with a different proposal, maybe Baillie Gifford or the like I’d be open to considering alternative ideas.