After a long-running campaign by activists, Alliance Trust finally buckled under pressure from investors and changed its management board, culminating in the departure of chief executive Katherine Garrett-Cox.
As avowed sceptics of investment trusts in general, these sorts of shenanigans usually pass us by, but this time it is different. The Trust’s complex sprawling empire encompasses Alliance Trust Investments, which runs several socially responsible funds.
The relationship between the investment trust and the asset management firm is perverse. While it is usual for an asset management firm to run some investment trusts, in the case of Alliance it is the investment trust that runs the asset manager.
Alongside its more traditional portfolio of global equities, the firm has branched out to launch an asset management business Alliance Trust Investments and platform Alliance Trust Savings.
In a roundabout way it is this odd set-up – combining its investment vehicle and the corporate umbrella – that has been the cause of all the controversy. US hedge fund Elliot Partners, an investor in the trust, has been critical of the management, claiming that its diversification into empire building has increased costs and lowered returns to the detriment of investors.
While the trust may have been going off the rails, its subsidiary, Alliance Trust Investments, has performed adequately. It has a stable of 11 open-ended investment companies spanning mixed assets, UK equities, global equities, bonds and absolute return. Most of the funds are run with a focus on socially responsible investment – a strategy adopted in 2013 along with the SRI team from Aviva Investors.
Performance across the range is more or less respectable: 55 per cent of its funds with a three- year track record are top quartile or better, which is a reasonable achievement compared to other asset managers, with that number rising to 70 per cent over one year.
TABLE
| Name | Sector | 1yr TR | Rank quartile | 3yr TR | Rank quartile |
| Alliance Trust - Sustainable Absolute Growth | Flexible investment | 0 | 2 | 24.25 | 2 |
| Alliance Trust - Sustainable Future Cautious Managed | Mixed investment 40% - 85% shares | 5.43 | 1 | ||
| Alliance Trust - Sustainable Future Managed | Mixed Investment 40% to 85% shares | 3.85 | 1 | 27.43 | 1 |
| Alliance Trust - Sustainable Future Defensive Managed | Mixed Investment 20% to 60% Shares | 5.24 | 1 | ||
| Alliance Trust Sustainable Future European Growth | Europe excluding UK | 6.29 | 2 | 34.78 | 3 |
| Alliance Trust - Monthly Income Bond | Sterling corporate bond | 0.48 | 4 | 10.06 | 4 |
| Alliance Trust - Sustainable Future Corporate bond | Sterling corporate bond | 2.75 | 3 | 13.32 | 2 |
| Alliance Trust - Sustainable Future UK Growth | UK All Companies | 11.42 | 1 | 42.07 | 2 |
| Alliance Trust - UK Ethical | UK All Companies | 11.89 | 1 | 45.47 | 1 |
| Alliance Trust - Sustainable Future Global Growth | Global | 0.22 | 3 | 26.49 | 3 |
| Alliance Trust - Dynamic Bond B Acc | Targeted absolute return | -0.95 | N/A | 4.6 | N/A |
The focus on ethical investing is usually a drag on performance, with lower returns accepted as the cost of a clean conscience. However, this has not been the case at Alliance Trust. Its ability to stick to an SRI mandate without sacrificing performance is the reason we selected two of the range for our FE Approved Fund List.
In particular, we have been impressed by Alliance Trust Sustainable Future Managed and Sustainable Future Absolute Growth funds.
