No-win scenario in battle for heart of Alliance Trust

The board of Alliance Trust may win the battle but lose the war with activist investors at its AGM later this month, analysts have warned.

Specialist investment trust analysts at Winterflood said that, while it was “hard to see Laxey’s proposals achieving success at the AGM, many would welcome the involvement of an external investment manager”.

It added that chairwoman Karin Forseke should “keep an open mind” after rejecting Laxey Partner’s proposal to outsource the management of the fund.

Winterflood said Laxey’s criticisms of the trust about rising costs and poor performance were “probably” justified. The analysts also cast doubt over the effects of a transfer of the management on the Dundee-based firm’s workforce. It said a transfer would “not be straightforward given Alliance Trust’s role as a significant employer in Dundee and its flagship status as a Scottish financial services group”.

Simon Elliott, head of research for Winterflood, said the board may have to look at outsourcing the management of the £2.1 billion trust regardless of the shareholder vote.

He said: “This is a real possibility, although the war may be protracted. Certainly the shareholders in Alliance Trust that we talk to are not happy holders. While they are not necessarily in agreement with Laxey’s proposals, they want things to change at Alliance Trust particularly in regard to its performance and discount. Hopefully Karin Forseke will be in a mood to listen to their views.”

ERIKKA ASKELAND