Alliance Trust picks outsourcing route to improve returns

● Venerable Dundee institution will choose eight top money managers

Alliance Trust unveiled a shake-up of how it invests billions of pounds yesterday, with a new outsourced model seeing it sell its ATI investments arm to Liontrust Asset Management for up to £30 million.

The 128-year-old Dundeebased investment trust will farm out £3.6 billion of equity investment to eight or so toprated firms to run its money in a bid to revive lacklustre financial returns.

As part of the outcome of a strategic review started last summer following boardroom upheaval, Alliance Trust also launched ambitious new financial benchmarks yesterday. It doubled its outperformance target against the MSCI All Country World Index from 1 per cent to 2 per cent.

Overseeing the arrangements for the new managers will be Willis Towers Watson, which advises on other firms’ investments worth $2.3 trilit lion. Lord Smith of Kelvin, chairman of Alliance Trust, said: “Since May, the board has evaluated carefully a broad range of options, with an open mind and a clear line of sight on how best we could improve the Trust’s performance.

“We believe there is good appetite for a global equity investment trust and that will remain our overall positioning. However, we are proposing a new approach to the investment management of the equity portfolio.

“Our proposal is that we will move from a single manager to multiple equity managers. All managers will be rated bestin-class and each will create a focused portfolio of their best investment selections.”

The moves met with a mixed industry response. A note from broker Canaccord Genuity said the new structure would “give investors a relatively low cost access to the best ideas of a highly focused and complementary list of leading global equity managers, selected by a manager with a significant depth of resource”.

is thought the sale of ATI could lead to some duplication and loss of jobs, but that most of the 50 or so related staff in Dundee and Edinburgh are likely to be unaffected.

The radical changes followed hostile demands from activist investor Elliot Capital for a shake-up of Alliance Trust’s operations and management that triggered the departure of chief executive Katherine Garrett-cox and chairwoman Karin Forseke.

Canaccord said it was “encouraged by these changes and believe that Alliance has at long last reached a point where much stronger fundamentals give it solid foundations.”

But Simon Elliott, head of research at Winterflood, branded the proposals as “underwhelming”, and said “we would not be surprised to see a significant amount of opposition to them or… apathy. It is not clear how this vision of Alliance Trust will substantially increase the fund’s appeal and relevance to investment trust investors and, consequently, we believe that further corporate activity cannot be ruled out”.