Alliance faces fresh Laxey pressure

ACTIVIST investor Laxey Partners has upped the pressure on the board of Dundee-based Alliance Trust to buy back its own stock in an effort to increase its share price.

Laxey commissioned an independent report which said a share buy back programme - either to cancel shares or hold them "in treasury" - was "the most efficacious method" of closing the gap between the value of the trust's shares and the value of its assets.

The report, which was released yesterday, also noted that the cost of running Alliance made it "one of the most expensive" funds due to the way in which it accounts for its expense ratio.

It claimed Alliance's implied strategy - to improve the net asset value (NAV) discount by improving performance - was flawed.

The report, by Fund Consultants LLC, said there was "no real evidence that performance alone will increase demand, and thus narrow discounts".

"Rather than being one of the least expensively run funds, Alliance is actually one of the most expensive," it added.

Laxey, which has a 1.7 per cent stake in Alliance, is campaigning to get shareholders to support two resolutions at the trust's annual general meeting next month, including one that will force the board to implement a so called discount control mechanism.

Katherine Garrett-Cox, chief executive of Alliance Trust, is opposed to having a rigid discount control mechanism as she believes it is "not in the interests" of long-term shareholders.

However, since Laxey came on board as an investor in 2009, the board of Alliance has bought back more than 15 million shares. The board has also since abolished a share voting system which Laxey alleged worked to the benefit of management.

Brewin Dolphin, which manages a 140 million stake in Alliance on behalf of its clients, yesterday said it recommended that shareholders support the board.