The Analyst: Alliance Trust signals change ahead as it reports interim results


Originally published at:
Alliance Trust has released its six months results to 30 June, there were few surprises in the results as the Chair provided an update of the progress of change at the trust and signalled a further upheaval, details of which will be announced in the Autumn. Fast Facts Major changes to be announced in the…


I agree with the gist of this, one can’t be sure how this will play out eventually but we know there is a lot of focus on performance both within the business with out it, and the discount is so wide that one is compensated for the uncertainty.

Plus there is the dividend compensation too, though it is not a high dividend in itself.


Didn’t think I’d be seeing Alliance Trust added to the buy lists so soon.

What’s funny about the Elliott situation is they seem to have come on board just when the businesses they operate are turning the corner, especially ATS, not so sure about the ATI business.

I wonder if Garett-Cox will survive the Autumn announcement. It’s about time she was going surely.


I expect the announcement in the Autumn will include a new CEO and new Chair of the Board. Their time is surely up.

I am not tempted to buy Alliance yet, show me a green SRI or what you call it investment fund that has performed better than any other? What I am most interested in when it comes to investing is long term performance, I don’t care if that is from green industries or not.


Trying to assess Alliance Trust costs is very difficult. The information provided by the Company does not paint a complete picture. Most of the internal costs of the Company, relate to the needs of the loss making subsidiaries. However, it appears that not all of the costs of the Board, the management and internal service requirements that arise in relation to and in consequence of, the operations of the subsidiaries are attributed to them. This flatters the performance of the subsidiaries in which the losses are, therefore, under stated.
Other areas of cost are concealed within the device of holding Alliance Trust OEICs within the main Investment Trust. The launching of new ATI Oeics is largely achieved by startup funds diverted from the master Trust fund. In several instances the OEICs contain predominantly the same investment holdings as the direct holdings within the Trust, and are operated by the same investment managers. The implication of this is that investment team fees are then levied twice on the same underlying investments, without any material change to the content of the fund. As a result of a lacunae in the AIC guidance not all of the fees paid in relation to the OEIC investments are aggregated into the reported total costs of the investment trust.
The selection of the OEICs for included within the master fund does not bare critical scrutiny. It does not appear to follow any consistent philosophy in the interest of the shareholders in Alliance Trust, nor does it appear to add any additional significant benefit by way of diversification.
Problems arise also in relation to the leverage of the Trust. Through the OEICs the main Trust fund has an exposure to bonds. The most recent borrowings, as reported at the AGM, were obtained at a greater cost than the return available on bonds of comparable term already held within the fund. This destroys value, and of course makes no investment sense at all.
Trying to operate a financial services company as a subsidiary of an investment trust creates obvious conflicts of interest. Some of the points noted above may illustrate of some of the difficulties arising from these conflicts.
In the light of these comments it is perhaps unsurprising that AT continues to trade at significant discount.


Good piece of analysis @New_Pilgrim but I expect the new board members Elliott has suggested (well 2 plus another joint AT/Elliott or something like that) will take the Board and Katherine the Great to task.

I have a holding in AT shares and I use the ATS platform. I must admit I don’t want them to sell the ATS business but I don’t see the point to ATI. I wasn’t aware of the double charging via the OEICs but that’s a scandal if it is true.

With all the scrutiny and extra Board members I expect AT to finally start to materially improve performance which is why I’m holding on in there for now.

PS- Your post could do with being broken up with spacing because it’s hard to read, it’s easy to lose your place in a huge block of text on a screen. You make some interesting points and arguments that I’m sure fellow AT investors would want to know about.


I was just reading about Aberdeen buying the Advance Developing Markets and Frontier Markets trusts [here][1] Note the following paragraph which is relevent to your point about double charging @New_Pilgrim

The team will be independent from Aberdeen’s existing equity and fixed income teams, and as AEC invests in a number of Aberdeen funds/trusts, investors will not be double-charged on these investments.

Someone needs to tell Alliance Trust that this is how you do it properly.


Do you hold shares in Alliance Trust @New_Pilgrim or did you in the past?

I kind of agree with some of the other comments on these forums that AT is under such scrutiny now because of the new outside Board members and media coverage that I expect performance to improve. But this is a huge tanker of a trust and it will take a little bit of time to turn it.

Spot on analysis from you though. :pig: