Board hits back in heated row over running of Alliance Trust

THE board of the beleaguered Alliance Trust has hit back at activist investors, labelling efforts to oust its chief executive Katherine Garrett-Cox as “disappointing” and a “waste of money”.

The growing row prompted Martin Gilbert, the chief executive of Aberdeen Asset Management (AAM), to signal his interest in taking over the £2.1 billion trust, while analysts have suggested there are “numerous management groups” who would “throw their hats into the ring” if the Alliance Trust board decided to put it out to tender.

But while Laxey Partners claimed that Gilbert made a formal approach to the board of Alliance, both AAM and a spokeswoman for the trust denied this is the case. Analysts at Numis added that Gilbert’s comments and interest, reported in a newspaper yesterday, appeared to have been “somewhat overplayed” and cast doubt on the possibility it would make a hostile bid.

The Dundee-based trust’s chairman, Karin Forseke, refused to consider outsourcing the management of the trusts assets, insisting this was “not an option”.

• View the full exchange here and view more here

But Laxey, an offshore-based hedge fund, called her outright rejection “staggering”, adding that the chairman’s move raised the spectre of “serious corporate governance issues”.

Alliance yesterday claimed that Laxey’s actions will have in total cost the trust £2.5 million. Last year, the activist hedge fund, led by Colin Kingsnorth, attempted to force the board to impose a rigid share buyback programme that was rejected by a vote of shareholders. Last month, the hedge fund put another requisition to be voted on by shareholders, that the board conduct a “comprehensive review” which would include looking at the “possibility of externalising the investment management of the company’s portfolio”.

Alliance yesterday defended its “improving” performance track record and insisted the cost of managing the portfolio was among the lowest in the sector. But Laxey said the way the trust calculated its expenses was “misleading”, claiming: “They put so many costs through their two loss-making subsidiaries [Alliance Trust Savings and Alliance Trust Investments] that the number they are left with has little merit.”

It added: “The Association of Investment companies are changing how such expense ratios are measured, so these numbers will change dramatically going forward.”

Forseke said Laxey was “motivated by short-term self-interest” which would be “detrimental” to long-term shareholders. The average individual shareholder has held investments in Alliance Trust for 25 years. The trust “strongly urges” investors to reject Laxey’s motion at the AGM on 27 April.

Forseke, who replaced Lesley Knox this month, said: “Of course you have to listen to all shareholders. But when it comes to this particular issue – being self-managed or outsourcing – we feel very firmly that we can best align the interest of our shareholders by keeping the management in-house.

“The timing of their requisition is peculiar, because the trend is [going] in the right direction. That is certainly not the time to make any changes.

“Our strategy, and the way we are managed and the track we are on, it is absolutely right for us to be self- managed at this time.”

But Laxey added the debate it has stirred over the running of Alliance was a “good thing”. It took credit for prompting the trust to buy back its shares, which Laxey claimed had “made £40m for shareholders” over the last financial year.