Alliance Trust faces ‘last chance saloon’ vote

THE board of Alliance Trust has been warned that it is in the “last chance saloon” this week to persuade investors it is the right manager of the firm’s £2.1 billion assets.

Under-pressure chief executive Katherine Garrett-Cox and her new chairman, Karin Forseke, face investors for a key vote believing they retain the confidence of the trust’s retail investors.

But activist shareholder Laxey Partners will on Friday demand management is outsourced to another firm.

It will be the second year Laxey has demanded change at the trust after forcing the board to instigate a regular programme of buy-backs.

The board will be aware that Martin Gilbert, chief executive of Aberdeen Asset Management (AAM), has signalled his interest in taking over the trust and has assured investors that he would attempt to retain jobs in Dundee where Alliance has been a significant employer for 124 years.

Although some in the City dismiss Laxey’s chief executive Colin Kingsnorth as a “greenmailer” – someone who is agitating to raise the share price to make a quick profit – there is frustration with the trust’s performance.

“The trouble is the underlying managers of the trust are just not good enough,” said one analyst. “The bigger issue is what comes after the AGM.

“But it is no longer the case that you can give Katherine the time to let things bed down. She has been running it for approaching six years.

“If they underperform at the managerial level the shareholders will have every right to say to the new chairman that this is not working, we need to look at something else.

“They are now in the last chance saloon – or they are knocking on the door. We really have reached that stage where they have to come up with the goods.”

The trust’s board has defended its track record to investors and analysts. It has argued that its cost ratio – known as TER – is the lowest in the sector. But critics, including Laxey, have disputed its calculation as it does not include the cost of the fund’s other two loss-making operations – the Alliance Trust Savings (ATS) and its Alliance Trust Investments (ATI). The City has also raised its eyebrows over the calculation that for ATI to make money, it will have to bring in 20 times the amount of assets it has under management to £2.5 billion.

All eyes are on AAM because its investment trust, Murray International, is considered to be the trust with which Alliance fails sharply to compete. A spokesman for AAM added that the two trusts share a high proportion of the same shareholders. Sources close to the Alliance Trust board said it is “encouraged” by “messages of support from retail investors”, and they expect that individuals – which make up 75 per cent of the trust’s shareholder register – will show their support.

Last year, more than 14,500 individuals backed the trust board which advised them to vote down the Laxey resolution. The Dundee firm expects a similar turnout from voters this year.

One source said: “You can imagine which way they are voting. This company is built on these shareholders. These individuals are the ones who go to sleep at night worrying about their investments and they are totally invested in Alliance Trust.”

A spokeswoman for the Alliance Trust said: “The board believes it is vitally important that all shareholders make their voice heard at the AGM and we would strongly encourage them to vote.”