Alliance Trust Investments is to be sold off and its Dundee-based parent group is to make a historic switch to multiple equity managers in a major operational shake-up.
The West Marketgait based Trust has spent months undertaking a review following its costly defeat last year in a boardroom battle with rebel shareholders.
The changes announced to the Stock Exchange are among the most radical in the Trust’s history.
However, the group today committed to keeping its headquarters in Dundee and the Alliance Trust Savings (ATS) operation and its 200-plus staff will not be affected by the changes.
The sale of Alliance Trust Investments (ATI) to Liontrust Asset Management for a fee of up to £30 million represents a premium of at least £5m to book value.
A portfolio of £2.5 billion of managed funds – mostly relating to insurance giant Aviva – will transfer to Liontrust under the deal.
The Trust’s share price nudged ahead in early trading as investors digested what the changes will mean.
Chairman Lord Smith – who was brought at the start of this year following the departure of former chairman Karin Forseke and CEO Katherine Garrett-Cox – said the Trust’s commitment to Dundee was “unchanged.”
“We think this is a better way of managing the money and it will lead to better returns,” Lord Smith told The Courier today.
“We are headquartered in Dundee and ATS has more than 200 staff there.
“We have had 49 years of year-on-year dividend growth and we want that to continue. In many ways it is business as usual as we remain a global equity portfolio.
“Dundee is unchanged but we are making a very exciting change in the way we are going to manage our money by bringing in eight of the best-of-the-best mangers.”
The new regime will see Alliance Trust’s £3.6 billion of funds managed with a medium to long-term investment return outlook.
Investment Group Willis Towers Watson has been appointed as the Trust’s overall investment manager and will be responsible for bringing in a roster of eight of the world’s top-rated equity managers to look after the funds.
Each of the managers will be responsible for around £400 to £500 million of the Trust’s cash and will pick a manage a portfolio of about 20 stocks to invest in.
Overall, the Trust’s individual holdings will rise from around 60 currently to around 200.
The move is a U-turn to the policy adopted by the Trust in recent years of shrinking the investment holdings to a small core group.
Deputy chairman Gregor Stewart admitted the new investment structure was likely to be more expensive to run than the current single-manager operation.
However, he said that at no more than 60bps the cost was still competitive and any rise in outlay would be offset by improved investment performance.
One of the key targets for the new multi-manager structure – which is expected to be in place by the end of March – is a doubling from 1% to 2% of the Trust target to outperform its peer MSCI All Country World Index.
“We are targeting a new level of outperformance,” Mr Stewart said.
Neither the sale of ATI nor the structural changes to how the Trust’s portfolio is managed require shareholder approval.
However, a general meeting of the company will be held early in the new year where investors will have the chance to vote on the proposed changes to the investment structure.
