Alliance Trust board changes as it underperforms index

The £3 billion Dundee investment trust company Alliance Trust plc, which uses external fund managers Willis Towers Watson (WTW), announced board changes as it revealed it underperformed its benchmark in 2020 but still increased its dividend for the 54th consecutive year.

UK fund management veterans Sarah Bates and Dean Buckley will join the Alliance Trust board.

Alliance Trust, an investor in global equities, reported an 8.5% net asset value total return for 2020 while its benchmark, the MSCI All Country World Index, returned 12.7%.

Chairman Gregor Stewart said while it was disappointing that the company did not outperform its benchmark, “this is not surprising given that index returns were heavily skewed towards a handful of fashionable US large and mega-cap stocks.”

On the Alliance Trust dividend policy, Stewart said: “The pandemic has severely reduced the dividends paid by many companies and this affected the company’s income in 2020.

“However, investment trusts are able to use their reserves to bolster their dividends in times of reduced income and Alliance Trust has one of the largest revenue reserves of any investment trust (£99.2m after the 2020 dividend).

“The board chose to use £10.0m of its revenue reserves to support this year’s increased dividend in spite of what we hope is a temporary reduction in dividend receipts.

I am pleased to report that the company’s ordinary dividend has increased for the 54th consecutive year.

“The total ordinary dividend for the year was 14.38p, an increase of 3% on last year.

“The board expects that it will continue to extend its record of year-on-year increases in dividends.

“Even in the extremely unlikely event that the company receives no dividends at all from its portfolio over the next two years, it could continue to pay an increasing dividend from its revenue reserves alone.

To further enhance the company’s ability to pay an increasing dividend in the future, the board intends to ask shareholders at the Annual General Meeting (AGM) for approval to convert its merger reserve of £645.3m into a further distributable reserve.”

On its board changes, Alliance Trust said Sarah Bates and Dean Buckley have been appointed as independent non-executive directors of the company and will join the board with immediate effect.

Karl Sternberg, the company’s senior independent director, will stand down from the board on June 30, 2021, with Bates succeeding Sternberg in that role.

Bates is a past chair of the Association of Investment Companies (AIC) and has been involved in the UK savings and investment industry for over 30 years.

Bates is currently chair of Polar Capital Technology Trust plc, a non-executive director of Worldwide Healthcare Trust PLC, chair of the John Lewis Partnership Trust for Pensions and an independent member of the investment committees of the BBC Pension Scheme and of the University Superannuation Scheme.

Bates was previously chair of Merian Global Investors Limited, St James’ Place plc, JP Morgan American Investment Trust plc, Witan Pacific Investment Trust plc (now Baillie Gifford China Growth Trust PLC) and chair of the audit committees of New India Investment Trust plc and of U and I Group plc.

Bates also previously held the role of senior independent director at St James’s Place plc, Witan Pacific Investment Trust plc and U and I Group plc.

Buckley is a former CEO of Scottish Widows Investment Partnership and HSBC Asset Management UK and Middle East and also held senior fund management positions at Prudential Portfolio Managers.

Buckley was also previously a non-executive director of Saunderson House Limited. He is currently chair of the audit committee, remuneration committee and senior independent director of JP Morgan Asia Growth & Income plc, senior independent director of Fidelity Special Values PLC and a non-executive director of Baillie Gifford & Co Limited and Smith & Williamson Fund Administration Limited.

Alliance Trust chairman Gregor Stewart added: “Despite the unparalleled turbulence of 2020, the company ended the year with its share price at a near record level and its run of increasing dividends extended to 54 consecutive years.

“It is disappointing that the company did not outperform its benchmark, but this is not surprising given that index returns were heavily skewed towards a handful of fashionable US large and mega-cap stocks.

“As the roll out of vaccines develops and the global economic recovery broadens out across industry sectors, your board and our investment manager remain confident that the company’s diversified but high conviction portfolio is well placed to deliver long-term outperformance.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.