‘We’ve taken a 19th-century trust and supercharged it’

Alliance Trust, the £2bn listed fund, may date back to 1888 but it reinvented itself in 2017 when it ceased to manage its own investments and appointed Willis Towers Watson, a global consultancy, to do it instead.

Performance has largely matched that of global stocks since then, much as before the change, but the investment approach is radically different.

Craig Baker, who runs the fund, tells Telegraph Money what changed and why he thinks the new process is superior.

WHAT CHANGES DID YOU MAKE TO THE TRUST?

We changed from a direct stockpicking model to a “multi-manager” approach, where other fund managers pick their best stock ideas for inclusion in the fund. We started working with eight managers in 2017 but added another, Vulcan Value Partners, last year.

Each manager picks their 20 “best ideas” (although one company selects 40) for our portfolio. This has brought the number of stocks in the trust from 60 to about 200.

Willis Towers Watson advises on close to £1 trillion in investments so we use our size to negotiate discounts with the fund managers. We kept costs low, at 0.65pc a year, which is a fraction of what the managers we use normally charge.

HAS THE TAKEOVER BEEN GOOD FOR SHAREHOLDERS?

Since we introduced the new strategy we have significantly reduced the trust’s discount, which is the difference between the value of the trust and the value of its stocks. This is good for shareholders because the true value of the fund is better reflected in its share price.

Performance has also been good. We were beating the global stocks benchmark until coronavirus caused markets to fall sharply. Investors sold the trust, which drove down its share price and opened up a discount again. This has been a problem for many investment trusts, not just ours.

It is too early to judge how successful our managers have been in these choppy markets but we are pleased at how they have performed so far. We are confident that the trust will recover from the crisis.

Alliance Trust underwent a radical change three years ago. Its new manager gives a progress report to Sam Benstead

WHAT HASN’T CHANGED?

We still take dividends very seriously. The trust has proudly kept its record of raising its dividend every year and has now reached 53 consecutive years. We are determined to extend this further. A rising income is an important part of what we offer to shareholders.

HOW DO YOU COMPARE WITH WITAN INVESTMENT TRUST?

Witan also has a “multi-manager” model, but our investments are more global. About half of the companies in our fund are American, compared with 30pc of Witan’s.

We also use smaller portfolios from the managers we work with, which we think makes us more likely to beat the market because overall there are fewer companies. We are cheaper as well, given our ability to negotiate discounts with asset managers.

HOW DO YOU DECIDE WHICH MANAGERS TO WORK WITH?

We have an 80-person team that specialises in researching the best fund managers around the world.

We pick our favourite managers and coordinate them to make sure their investments do not overlap.

We want a balance of different types of company to give a diversified selection of global firms.

WHAT HAS BEEN YOUR BEST INVESTMENT?

Qorvo, an American computer chip maker, returned 84pc last year. It is a small company with fewer than