Alliance making '˜good progress' with strategic review

Dundee wealth manager Alliance Trust today said it will reveal the outcome of a strategic review, aimed at boosting shareholder value, within months.

Alliance Trust chairman Lord Smith of Kelvin. Picture: Neil Hanna
Alliance Trust chairman Lord Smith of Kelvin. Picture: Neil Hanna

The firm, which last month saw a Rothschild‑linked investment company walk away from talks over a potential £5 billion tie-up, has already hailed progress in lower costs, narrowing the discount of its share price compared to the net asset value (NAV) and creating an independent board of directors.

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Chairman Lord Smith of Kelvin today said Alliance Trust’s strategic review was ongoing and “includes a broad range of possible courses of action”.

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He added: “We are making good progress and intend to report on the outcome of our review later in the year.”

Smith’s comments came as Alliance revealed it underperformed its benchmark during the six months to the end of June, which it blamed on turbulent market conditions surrounding the EU referendum in June, “when the trust’s quoted equity portfolio gave up the outperformance it had recorded over the prior five months”.

Total shareholder returns of 2.6 per cent and an NAV total return for the trust of 6.6 per cent during the half year came in below the MSCI ACWI benchmark return of 12 per cent.

Smith said the wealth manager’s share price had reached new highs since the end of June. Shares closed at 555.5p yesterday.

But Alliance ended the first half with a discount to NAV of 11.4 per cent, compared with 7.9 per cent at the end of December, “at a time of widening discounts for investment trusts in our peer group”.

“The economic outlook for the second half of 2016 appears unclear after the EU referendum vote,” Alliance Trust Investments said today, pointing to a range of political risks including the US presidential election in November and other upcoming votes in China, France, Germany and Italy.

“The UK economy appears set for at least a mild recession as investment and consumption freeze up in the midst of so much uncertainty. The question remains as to whether this will spill over into Europe and result in a slowdown across the global economy. The unprecedented nature of the current situation makes forecasting the impact particularly challenging.”