Alliance Trust has sold its platform business to rival fixed fee provider Interactive Investor as it focuses on its core global equities portfolio.
The £2.6bn investment trust sold the Alliance Trust Savings platform for £40m along with its Dundee offices. It represented 1.3% of the portfolio, which is a multi-manager approach managed by Willis Towers Watson.
Board member Clare Dobie had previously said shareholders were divided over whether the platform should be sold.
JPM Multi Manager Growth is the only fund or investment trust that holds Alliance Trust in its top 10 with a 3% allocation, according to FE Analytics. It holds other global equity rivals, like the F&C Investment Trust and Scottish Mortgage. JP Morgan Asset Management did not wish to comment on the sale.
Global equities become core focus
The announcement represents one of the final steps in the investment trust shedding its non-core assets, leaving it to compete with generalist global equity rivals like the F&C Investment Trust, said Winterflood Investment Trusts analyst Kieran Drake. It sold Alliance Trust Investments in April 2017 and has since been selling private equity assets.
Non-core assets now account for £13.4m, or 0.48%, of net assets in the trust. The investment sold its stake in its in-house asset manager to Liontrust Asset Management in 2017 for £30m.
Interactive Investor and ATS are the two largest fixed price investment platforms. The combined platforms represent £35bn of assets under administration and 400,000 customers.
Market response to ATS sale
The past 18 months have been transformative for the investment trust as it sheds its non-core assets to focus on its global equities portfolio, Canaccord Genuity said in an analyst note welcoming the announcement. Over the period, the global equities portfolio has returned 18.1% versus a MSCI ACWI total return of 16.4%.
“This transaction further streamlines the investment proposition and accordingly is a welcome development,” said analysts Alan Brierley and Ben Newell.
Chelsea Financial Services managing director Darius McDermott said: “It was an investment trust that on the side had an asset management business and on the side had a platform business, neither of which were core assets to the trust. If you looked at it four or five years ago you would have thought it quite a strange structure. They have managed to shift that discount from around 15% in 2014 to the 9% margin today.”
However, shares in the investment trust barely moved in response to Monday’s announcement, up less than 1% to 732p by the afternoon.
Drake said: “It’s a relatively small part of the portfolio. People will have been anticipating an announcement like this given the strategy and the other disposals.”
Fixed fee continuity for Alliance Trust shareholders
Alliance Trust said ATS customers would benefit from the sale.
“The two businesses are highly complementary and ATS customers, many of whom are Alliance Trust shareholders, will benefit from Interactive Investor’s similar low flat-fee structure, as well as its increased scale and focus,” said chairman of the trust Robert Haldane Smith.
ATS represents 34% of the investment trust’s shareholder base.
McDermott thought most ATS shareholders in the trust would remain in trust following the migration to Interactive Investor.
“These are people who have probably held the trust for a long time. Maybe one or two might sell but as long as Interactive Investor offer them a good platform service I’m sure most people will stay. The flat fee structure should in theory keep people happy.”
