Dundee-based investment firm Alliance Trust has announced a radical strategic plan that includes the outsourcing of equity portfolio management and the sale of investment division Alliance Trust Investments to Liontrust Asset Management for up to £30 million.
US activist shareholder Elliott Advisors — Alliance Trust’s biggest shareholder with a stake of more than 10% — has long been putting pressure on Alliance to restructure.
“Responsibility for investing the Trust’s equity portfolio will move from a single manager, currently Alliance Trust Investments (ATI), to a multi-manager model,” said Alliance Trust.
“Approximately eight of the world’s top-rated equity managers will be appointed, each of whom will create a portfolio for the Trust of typically around 20 stocks, representing their best investment ideas.
“In order to implement this new approach, and following a competitive process, the board has decided to appoint Willis Towers Watson (WTW), a leading investment group, as the Trust’s overall investment manager.”
Alliance Trust said that while the proposal to change the management of the Trust’s equity portfolio does not require a shareholder vote, the board “believes that it is appropriate to give all shareholders the opportunity to support this change.”
As such, a general meeting is expected to be convened early in the New Year.
The reaction of Elliott Advisors to Alliance Trust’s radical plan will be crucial.
Elliott Advisors told the Financial News publication: “Elliott notes the board’s proposal to externalise the investment management of Alliance Trust, an outcome we have long advocated.
“We look forward to engaging with the board to assess the details of its externalisation strategy and other conclusions of the strategic review.”
Simon Elliott, head of research at Winterflood, told Financial News that further corporate activity cannot be ruled out.
The analyst also said that Winterflood had expected a “25-30% tender offer” to provide an exit for Elliott and other shareholders.
“We believe that these proposals are underwhelming and we would not be surprised to see a significant amount of opposition to them or, at the very least, apathy,” Winterflood’s Elliott told Financial News.
Alliance Trust plc chairman Robert Smith said: “Since May, the board has evaluated carefully a broad range of options, with an open mind and a clear line of sight on how best we could improve the Trust’s performance.
“We believe there is good appetite for a global equity investment trust and that will remain our overall positioning.
“However, we are proposing a new approach to the investment management of the equity portfolio.
“Our proposal is that we will move from a single manager to multiple equity managers.
“All managers will be rated best-in-class and each will create a focused portfolio of their best investment selections.
“We are confident that this exciting and differentiated investment approach will help to improve Alliance Trust’s performance on a consistent basis.
“Accordingly, we have doubled the level targeted for outperformance, reafirmed our ambition to continue our track record of year-on-year dividend growth, yet at a competitive cost.
“We firmly believe that this will put Alliance Trust on a strong footing for many years to come.”