However, he said: “combining an entirely equity-based investment trust with the multi-asset approach of RIT Capital does not, on the face of it, make huge sense.
“While it might be attractive to argue that outsourcing management of Alliance Trust – like Witan have successfully achieved in recent years – would be a better option for the board of Alliance Trust, it is worth considering RIT Capital’s stated objective of trying to ‘deliver long term capital growth, while preserving shareholder’s capital’.
“The rise of open ended multi-asset funds such as Standard Life’s Global Absolute Return Strategy (widely known as GARS) and institutional ‘Diversified Growth’ funds in the last decade shows that multi asset funds have a role. Investors value the ability of actively managed, diversified funds such as RIT to ‘win by not losing’, which as its very long track record demonstrates, works well.”
Which, Peters points out is, ironically, what the previous management of Alliance Trust had been trying to achieve.
For James Carthew, head of research at Quoted Data this is exactly what the decision is ultimately going to hinge on: how best to manage these sorts of large global trusts.
“Alliance Trust has for a long time been trying to do everything itself. It has been down the multi-manager route and it hasn’t worked for them. Now they have reined that back to a more concentrated, equities-focused approach.”
And, he added, arguably the directors could make the case that it has just started along this route and more time is needed to prove itself.
At the other end of the scale, he said, is RIT, which takes the view that it cannot do everything itself. As a result, he said, it is focused on picking managers and trying to get the asset allocation correct.
“For Alliance Trust shareholders, you are asking them to abandon the new road altogether and go back to basically what they were doing initially, which might be a tough sell.”
For Numis, while there are solid reasons to argue for both outcomes, on balance, it believes the board is more likely to favour appointing an external manager than agree a merger with RIT Capital, an outcome it said “remains a “long shot””.
But, it added: “The Board of Alliance Trust recently stated “that there is an appetite among shareholders for a global equity investment trust offering strong and consistent investment returns through a combination of capital growth and a growing dividend at a low cost”. We would agree with this statement, but it is unlikely to be achieved without further change.”
What is clear from all the comments so far seen, is that Alliance Trust’s future remains uncertain. And, it would seem, investors need first to ask themselves, what exactly are they trying to achieve?
