Alliance Trust pounces on fixed income team at Scottish Widows

Published on Thursday 27 August 2009 21:24

ALLIANCE Trust has swooped on Scottish Widows Investment Partnership to poach a four-strong bond team that includes its rival's global head of fixed income.

The Dundee-based investment trust yesterday said Rod Davidson, who worked with its chief executive Katherine Garrett-Cox at Aberdeen Asset Management, would join the firm in January. It has also raided Swip's 31 billion fixed income team to snatch Gareth Quantrill, Stuart McMaster and Stuart Steven.

Garrett-Cox said the hires would give the 120-year old Alliance Trust added investment options at a time when income from equities was drying up. "When the markets are not going your way you can be hamstrung, so this gives us a greater balance," she said. "We believe they will add value to Alliance Trust."

Alliance Trust has always invested in fixed income but does not have a dedicated resource for the asset class, said Garrett-Cox.

The quartet will be part of the trust's 130 million asset management division, which currently offers only equity funds.

The market will see the raid as a setback for Swip, which said Andrew November, chief investment officer fixed income and property, will have overall responsibility for the fixed income team.

Graeme Caughey and Neil Murray will take responsibility for specific external institutional mandates, with Murray and Luke Hickmore managing all investment grade portfolios.

Alliance Trust's move will allow it to take advantage of tax changes coming into force on 1 September improving the tax efficiency of fixed income for investment trusts. As of Tuesday, trusts will be able to claim a tax deduction for any interest distributions made, effectively removing their corporation tax liability and putting them on a level playing field with open ended investment vehicles.

Ken Taylor, director of IFA Mackenzie Taylor Wealth Management, said it was good news for Alliance Trust investors.

"The modification of taxation on fixed interest in investment trusts and the likely future demand for income from non- equity sources make the need for expertise in this sector mandatory. I would imagine that gaining an existing team has considerable merits in terms of offering broad coverage of what is a massive asset class."