ALLIANCE TRUST: £3bn fund lives up to its name

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ALLIANCE TRUST: £3bn fund lives up to its name with mix of managers across world to run parcels of the assets under its wing

Investment trust Alliance is a global fund with a difference. Rather than entrusting an individual investment manager to oversee the portfolio, it employs a number of experts from across the world to run parcels of the £3billion of assets under its wing. 

This multi-manager approach, overseen by financial consultants Willis Towers Watson, has worked to the advantage of shareholders. 

Since WTW came on the scene in April 2017, the portfolio has delivered a total return for shareholders of 62 per cent. By way of contrast, the average global investment trust has generated overall profits of 40 per cent over the same time period. 

Stuart Gray is one of a three–strong team at WTW that oversees the trust’s assets. Along with Craig Baker and Mark Davis, Gray appoints the managers who run slices of the trust’s assets. They have the power to hire and fire, challenge the managers on their performance and rebalance the portfolio so that no individual runs too big a portion of the trust’s money. What they cannot do is influence the stocks that the individual investment teams pick. 

Gray says: ‘Our approach adds an extra layer of diversification. Our managers all bring something different to the investment party. They complement rather than duplicate. It means we are not dependent upon any one investment style or particular stock market for returns.’ 

Currently, the trust employs nine managers. Among them is Ben Whitmore at UK asset manager Jupiter (an expert in seeking out undervalued stocks); Andy Headley at Veritas Asset Management (a global equity specialist); and Jonathan Mills and Simon Denison-Smith of Buckinghamshire-based Metropolis Capital (high conviction global investors). 

Of the eight investment teams chosen in 2017, only two – Los Angeles-based First Pacific Advisors and River & Mercantile – have fallen by the wayside. Three have come in – Metropolis and US-based Vulcan Value Partners and Sands Capital. 

The ditched managers were not dropped on performance grounds, but because of a change of ownership in the case of River & Mercantile and the investment team that WTW were using at First Pacific decamping to set up their own investment operation. The complementary investment styles are reflected in the fact that of the 197 stocks in the trust, only 15 are held by more than one management team. These tend to be big global stocks such as US tech giants Alphabet, Microsoft and Visa. 

Gray believes its use of managers with different investment skill-sets provides the overall portfolio with a degree of ‘resilience’. 

‘Equity experts try to make big calls on markets and sectors,’ he adds. ‘Sometimes, they get these decisions right. On other occasions, they don’t and lose money for investors. Our spread of managers mitigates against this.’ 

On markets, Gray says it is easy to make a bear (negative) case – high inflation, rising interest rates and geopolitical tensions. But he adds that there are some positive signals that investors should not ignore – inflation peaking, the reopening of China’s economy and an end to some of the supply chain issues which have driven up costs.

A commitment to a rising dividend is a key component of the Alliance package. It has grown its dividends for 55 consecutive years and looks on course to achieve yet another increase for the 2022 financial year. 

So far, it has delivered three quarterly payments totalling 18pence a share. This compares with payments for 2021 as a whole of 19.05pence. The trust’s stock market ID code is B11V7W9 and ticker ATST. Total annual ongoing charges are 0.9 per cent. 

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