Alliance looks East for growth

• Katherine Garrett-Cox said the UK's 'debt indigestion' made it less attractive for investment for Alliance Trust

The prospect of a second round of quantitative easing and the UK's stubborn debt problems are pushing Alliance to invest even more heavily in Asia, where banking stocks are particularly attractive, she said.

"We have a very hefty debt burden," she said. "The UK debt indigestion, as we call it, is a big issue. It basically means that we are going to have to spend 53,000 per household by 2013-14 to pay it off."

Garrett-Cox, who was one of the Square Mile's most fted fund managers before taking the helm at Alliance in 2008, delivered the bleak forecast as the UK's largest listed investment trust announced it was on track to deliver its 44th consecutive dividend hike for the current financial year.

She said her firm already had more than 85 per cent of the annual dividend payment covered, despite being more than four months away from the close of its financial year at the end of January 2011. The trust anticipates a full-year dividend of 8.25p per share, up from 8p.

Delivering interim figures yesterday, Garrett-Cox offered a cautiously upbeat assessment of the firm's performance in the first six months, with the value of its assets increasing 3.8 per cent in the period to 31 July.

She told The Scotsman that even more progress has been made in August and September, with net asset value up 8.5 per cent as of 24 September compared with advances on the FTSE All Share index of 7.6 per cent.

She said the trust - which has a market cap of about 2.2 billion - saw better prospects for long-term growth in Asia where financial stocks are less risky than in the West.

"They have a great savings culture and a desperate need for bank financing."

As well as the more developed Chinese market, Garrett-Cox said that Alliance Trust had increased its exposure to stocks in emerging Asian markets, such as Indonesia, the Philippines and Thailand.

Alliance Trust, which employs more than 250 people across its three offices in Dundee, Edinburgh and London, has reduced its exposure to the UK from 45 per cent to 31 per cent over the past three years and said yesterday it was looking for "opportunities to reduce further our UK weighting".

Total revenues, including unrealised gains, dropped from 203 million to 145m amid tough comparisons with the previous year when equity markets staged a sharp rebound.Pre-tax profits fell to 122m from 180m during the same period last year.

Shares in Alliance closed down 3p at 333.8p.

• Aberdeen Asset Management said yesterday that inflows accelerated over the summer, with clients favouring equity funds despite volatile markets.

The firm reported a net 621m of new inflows during July and August, above the 337m in the previous three months.