The new independent boards for Alliance Trust and ATI will mean Katherine Garrett-Cox will step down from the board of Alliance Trust but remain a director of ATI, and will continue as chief executive of the trust.
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The Dundee-based wealth manager said that after consulting shareholders, it had chose to simplify its structure and make the board fully independent, staffed exclusively with non-executive directors. She will retire from her role on the board of Alliance Trust as a result.
Garrett-Cox, who will continue as chief executive of Alliance Trust Investments, has always been battling demands from shareholders to tackle the fund’s underperformance and the gap between its shares and the value of the assets it holds.
Chief financial officer Alan Trotter, the other executive now on the board, will leave the trust “to continue his career in a publicly listed company elsewhere”.
The Alliance Trust Shareholder Action Group commented: “Although the changes announced are positive and we welcome that the board has responded to the concerns of shareholders and our own representations on the issues at this company, we see this as step one in an evolutionary process”.
As part of its restructure, Alliance Trust Investments will be given the mandate to run the trust, but could lose this if it fails to deliver.
The board says it considering outsourcing the management of the trust to an external asset manager and is open to this option in the future, with ATI having a six month notice period for its contract.
The investment performance of the trust will now be linked to the MSCI All Country World Index, with the target benchmark for performance being 1 per cent over the index net of fees.
Costs, another focus of Elliott’s attacks, will also be tackled.
Charges will be dropped to 45bps or less by the end of 2016 – a year ago charges stood at 60bps.
Meanwhile the trust also announced it planned to “increasingly focus on global equities and will dispose of its fixed income, legacy mineral rights and property assets as soon as practicable”. It added it was also expecting a “meaningful profit” from Alliance Trust Savings next year. That compared with 4.9 percent for its peers, which include Scottish Mortgage and F&C Investment Trust, data from trade body AIC showed. Two-thirds of administrative expenses will be allocated to capital, rather than revenues, to offset the loss of income from the disposal of its non-equity assets.
The board of Alliance Trust also confirmed that it is willing to use share buybacks to get the long-term discount down to single digits, it is now 12 per cent.
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The investment team will be awarded a mandate to manage the trust’s portfolio on standard industry terms, under the supervision of a newly established management engagement committee, chaired by Karl Sternberg, which will conduct regular performance reviews.
