Dundee-based investment firm Alliance Trust, which appointed external asset managers Willis Towers Watson (WTW) in April 2017, said on Friday it underperformed its benchmark in 2018.

The £2.4 billion trust’s equity portfolio lost 4.2% last year, while its benchmark, the MSCI All Country World Index, lost 3.3%

“While disappointing, the equity portfolio’s underperformance versus the benchmark for the 12-month period needs to be put in the context of challenging conditions for equity markets, particularly the highly volatile last quarter of the year, and what was a difficult period for many active managers,” said Alliance Trust.

“It is important to note that despite 2018 the equity portfolio has still outperformed the benchmark since the current investment approach was put in place in April 2017.”

Alliance Trust raised its total ordinary dividend for 2018 by 3% to 13.55p, marking the 52nd consecutive annual increase.

Alliance Trust plc chairman Robert Smith said: “2018 was a challenging year for global equities with most markets falling and many active managers struggling to outperform.

“Like others, we trailed our benchmark, partly due to market returns during much of the year having been driven by a narrow group of very large companies.

“Our strategy of appointing a number of managers with different styles and approaches to select their best stocks means we will never have a very concentrated exposure to one segment of the market.

“By investing more broadly across companies, countries and sectors, we should avoid the short-term performance highs and lows driven by particular market factors.

“In the long run, though, we expect our portfolio to outperform the market.

“Meanwhile, we continued to provide investors with income by increasing our dividend, which has now risen every year for 52 consecutive years.

“During the year, we made further progress towards simplifying our business by disposing of many of our remaining non-core investments, and we are in the process of selling, subject to regulatory approval, our subsidiary, Alliance Trust Savings, to Interactive Investor Limited.

“The rationalisation of our holdings will enable us to focus on global equities which at year-end represented over 97% of our assets.

“We are clear on the direction of the Trust and that it will continue to prove a wise choice as a core investment for the long term”