According to analysts at Numis, the news raised the possibility of hostile corporate action “as it may not be easy to trade out of such a large stake” with the current value being £252m.
Since Katherine Garrett-Cox was appointed chief executive of the investment company in 2008, she has made substantial changes, including adding the fixed income team, winding down the property and private equity teams and introducing the global equity portfolio run by Ilario de Bon.
A statement from Numis said: “We believe that the drivers of performance are much clearer under the new strategy, and there appears to be progress in the subsidiary businesses (Alliance Trust Investments and Alliance Trust Savings).
“However, performance has remained relatively poor, with the NAV up just 6.4% over the past 12 months compared with a rise of 8.1% in the MSCI AC World Index. Over the past five years, the fund’s NAV growth of 92.7% is also well behind the return from the benchmark of 109.8% and Global Growth peer group of 113.7%.
Almost three years ago, shareholders voted against a proposal from Laxey Partners calling for the board to consider bringing in external fund management and allowing shareholders to sell their shares closer to NAV.
Laxey only managed to gain support for 11% of the share capital, including 5% held by Laxey and Elliott Associates, and it subsequently sold its stake.
Eliott is a renowned active investor and Numis believes that by growing its stake it puts further pressure on Alliance Trust to improve performance and narrow its discount.
“We would not be surprised if its buyback programme became more active once again. However, the majority of the shareholder base is represented by retail investors, which means that Elliott may not find it easy to force corporate action. Nevertheless, history suggests that it is not a group that should be taken lightly by Alliance Trust’s Board/management.”
