The trust’s latest results reveal it provided decent returns for investors but failed to meet its benchmark in 2016 after batting off an unsolicited takeover offer from RIT Capital Partners and buying back shares from its “thorn in the side,” activist US-based investor Elliott.
While Alliance Trust Investment, bought by Liontrust Asset Management last year, bounced back from a £2.1m loss in 2015 with a profit of £0.4m last year, stock selection was blamed for the trust’s NAV total returns falling 6.5% behind its MSCI AC World Index benchmark.
However, the firm did hit its 50th consecutive year of ordinary dividend increases with the total dividend now 16.4% higher than 2015, at 12.774p, and announced a new approach to investment management.
Willis Towers Watson (WTW) will take over management of the trust’s investments from April and aim to outperform the benchmark by 2% a year over rolling three-year periods and keep total annual costs below 0.65%.
Richard Troue, head of investment analysis at Hargreaves Lansdown, said changes to the trust’s investment strategy were sensible but that the new fund managers would feel the pressure of providing solid returns.
“Alliance Trust provided investors with a strong return in 2016, but it was still disappointingly behind its benchmark.
“Looking back at past performance doesn’t tell us much about future prospects for Alliance though, seeing as a new investment approach was approved by shareholders at the end of last month, which should hopefully deliver a fresh start for the trust,” he said.
“The pressure will be on to meet this target in order to vindicate the strategic review, not to mention turning around several lacklustre years of performance, and justifying an increase in charges to boot.”
