Dundee’s Alliance Trust ups divi for 52nd year on trot

Alliance Trust, the £2.4 billion Dundee-based fund, has maintained that its strategy was delivering for investors despite undershooting its benchmark last year.

Chairman Lord Smith of Kelvin said the year had been challenging for global equities. Picture: Lisa Ferguson
Chairman Lord Smith of Kelvin said the year had been challenging for global equities. Picture: Lisa Ferguson

The trust’s equity portfolio lost 4.2 per cent while its benchmark index fell by 3.3 per cent, although the trust did deliver its 52nd consecutive annual increase in dividends for shareholders.

Chairman Lord Smith of Kelvin said the year had been challenging for global equities with most markets falling and many active managers struggling to outperform.

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“Like others, we trailed our benchmark, partly due to market returns during much of the year having been driven by a narrow group of very large companies,” he said.

But Lord Smith stressed that overall during the period since it shifted to a new investment strategy in 2017, the trust’s performance had been ahead of its benchmark, returning 5.1 per cent compared to 4.1 per cent.

The new approach, which saw a number of external managers appointed to run parts of the portfolio, was one of the changes introduced following the trust’s high profile battle with rebel investor Elliott Advisors which waged a long-running campaign to boost its investment performance.

Alliance Trust said that its strategy of investing more broadly across companies, countries and sectors, “should avoid the short-term performance highs and lows driven by particular market factors”.

“In the long run, though, we expect our portfolio to outperform the market,” Lord Smith said.

The trust also said it had made further progress towards simplifying its business by disposing of many of its remaining non-core investments. It is currently in the process of disposing of its Alliance Trust Savings (ATS) arm to rival Interactive Investor in a £40 million deal.

The move, which was announced in October and is awaiting regulatory approval, will see around 300 ATS staff move over to the UK’s second-largest investment platform, which has said the operational base of the business will remain in Scotland.

Explaining the decision to sell the business, Alliance Trust said that the market in which ATS operates is “very competitive and high technology costs make it difficult to achieve profitability without significant scale”.

Lord Smith said the simplification of the group will enable it to focus on its global equities portfolio which at year-end represented over 97 per cent of assets.

“We are clear on the direction of the trust and that it will continue to prove a wise choice as a core investment for the long term,” said Lord Smith.

He added that the trust does not believe Brexit, regardless of how it finally materialises, will have a significant impact on it.

The trust raised its total ordinary dividend for 2018 by 3 per cent to 13.55p.