Bill Jamieson: Alliance Trust assembles its orchestra

Those who have caught a snatch of contemporary classical music on Radio Three are often immediately struck by a sense of wild and tuneless cacophony: a sound comprising many notes but no identifiable theme.

Alliance Trust's 'orchestra' is not assembled on a single stage but is scattered round the globe, writes Bill Jamieson. Picture: Erich Auerbach/Getty Images
Alliance Trust's 'orchestra' is not assembled on a single stage but is scattered round the globe, writes Bill Jamieson. Picture: Erich Auerbach/Getty Images

Followers of Alliance Trust may well encounter a similar sensation of dissonance and utter strangeness on reading of the latest changes to the investment management of Scotland’s must venerable investment trust.

Instead of one combined fund management or “orchestra”, there are eight separate managers, each managing 20 stocks. And it is immediately disorientating to discover that the “orchestra” is not assembled on a single stage but is scattered round the globe, their contributions piped in from London and Toronto, Los Angeles and Fort Lauderdale (Look in vain for Dundee).

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Welcome to the wonderful world of Willis Towers Watson (WTW), the “leading investment group” which is to become the investment manager of this £3.3 billion trust. At this point one expects to see a reference to WTW’s pedigree establishment and long-run record of investment management through the storms and upheavals of the past century. But the company was only formed in January last year – and after an appropriately disputatious merger.

Instead of one conductor there are to be three: Craig Baker, chief investment officer of WTW, who will lead the eight-strong “team” responsible for the combined portfolio, with David Shapiro and Mark Davis as co-portfolio manager. By way of fall-back, Towers Watson Investment Management (Ireland) Limited will be appointed as alternative investment fund manager.

This multi-manager approach to fund management is not new: fund manager Witan has ten external managers for its £1.6 billion trust with modest though not outstanding success. Critics of this approach point to the dangers of an unwieldly spread of different shareholdings at Witan – 600 at one point – which can work as an anchor on performance. And what of capital protection – who decides when to go liquid faced with a “Black Swan” moment?

To be fair, it makes sense to break up a portfolio of this size across different competencies. Chairman Lord Smith and the Alliance board cannot be faulted for seeking to bring in the best from around the world.

And there is a harmony of sorts, or at least in the stylised vocabulary of investment objectives. For example, this about First Pacific fund managers Pierre Py and Greg Herr, who “typically employ a long-term value investment approach, investing in companies that they believe have sustainable business models, exhibit financial strength, are run by operationally strong managers and whose stocks trade at a significant discount…” Don’t all investors aspire to this? Where is the point of distinction?

Or this, about Lyrical Asset Management (New York): “Value matters most to Lyrical and the team also maintains a strict discipline of investing in quality companies that they believe are relatively easy to analyse. They believe the combination of value, quality, and straightforward business model creates resiliency in the portfolio and the greatest likelihood of long-term absolute performance and outperformance.” Familiar?

Or there is Rajiv Jain head of investments at GQG Partners, Fort Lauderdale, who “looks for high-quality and sustainable businesses through a fundamental investment process utilising both traditional and non-traditional sources of information.” Don’t we all?

The logic is that the pursuit of one theme or “tune” in today’s investment world is old hat, and that a greater harmony – performance – will ascend out of this immediate dissonance. In truth, we will not know the sound of these stylised ensembles until we see the investments they have made. But it does all seem to be over-elaborate to a fault – and keeping the disparate performers faithful to their briefs a demanding task. Ambitious targets have been set: the overall equity portfolio to outperform the existing benchmark, the MSCI All Country World Index, by 2 per cent a year net of costs, over rolling three-year periods, and recommitment to the dividend policy: generating revenue to continue the 49-year track-record of increasing dividends year-on-year.

The Alliance board will host informal forums for shareholders to ask questions of Craig Baker and David Shapiro: one in Dundee on Friday 27 January (at West Park, Perth Road, 2pm) and in Edinburgh on Monday 30 January at the EICC, 150 Morrison Street at 2.30pm.

A shareholder general meeting to approve the proposals will be held on 28 February. There may be a multi-media screen and a cacophony of noise from eight different fund managers – but shareholders still get just one vote.