Alliance boss Katherine Garrett-Cox under hedge fund attack

KATHERINE Garrett-Cox could be forced to fight for her job and those of hundreds of staff at Alliance Trust after an activist hedge fund renewed its attack on the company’s performance.

Colin Kingsnorth, the chief executive of Laxey Partners, admitted the position of Alliance’s chief executive was likely to be considered untenable if his demand to find new managers for the fund’s assets won investor support. But he denied that his fund’s latest move was aimed specifically at removing Garrett-Cox.

“It is not really for us to lay that out,” he said. “We are trying to give the board as much flexibility as we can to review the options and come up with a plan. Alliance Trust is the only major investment trust that is self-managed. It has a vast staff and fund managers dotted around Edinburgh and London.”

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The risks to hundreds of jobs at Alliance’s head office in Dundee was confirmed by analysts who said that any review would have to consider how new managers could “remove” staff costs at the firm. But analysts at investment bank JP Morgan said that “the fee paid to a third-party manager would have to be extremely low”.

Other analysts confirmed that the risks to jobs – including that of Garrett-Cox – was a factor if the asset management was out-sourced, but that this was “complicated” because the firm also ran other businesses such as its savings and investment arms.

Last week, Alliance Trust announced that it had received a requisition to go to the vote at the firm’s AGM on 27 April.

The requisition from Laxey demanded that the board of Alliance Trust launch a review that would “include the possibility of externalising the investment management of the company’s portfolio”.

The move renewed pressure to force the board of Alliance to close the gap between the value of the firm’s shares and its assets – known as a NAV discount. Last year, Laxey attempted to get the board to adopt a “discount control” mechanism, whereby the trust’s board would be forced to buy back its own shares when the NAV discount was more than 10 per cent.

Investors voted to support the Alliance Trust board, which had argued against the imposition of a fixed mechanism, but the board did begin a process that has so far seen it buy back 67.8 million shares.

The trust’s chairman, Lesley Knox, who fought against the idea of buy-backs, also announced her resignation and will be leaving the board in April in favour of incoming chairman Karin Forseke.

Kingsnorth said the improved performance at Alliance has been “because we hold their feet to the fire”.

But he added that “not much has happened to the discount” since the trust started buying back its shares.

A spokesman for the trust dismissed the threat to jobs in Dundee as “highly speculative”, adding that it would be “impossible” to pay less for staff to administer the fund.

He said: “Who would you give the assets to that could be cheaper than staff costs of £9.4m? You would have to do it at 65 per cent less than the cheapest buyers in the market – that would be impossible”.

The spokesman also insisted that self-management of the fund was better for investors: “Our investment team are more closely aligned than if the managers worked for a third party.”