Alliance Trust under presure after poor results

Alliance Trust’s embattled boss, Katherine Garrett-Cox, has come under renewed pressure after the company revealed it had been outperformed by most of its rivals in the first half of the year.

Ms Garrett-Cox, who earlier this year survived a bruising encounter with Alliance’s biggest shareholder, the New York hedge fund Elliott Advisors, admitted the results were “disappointing” ahead of a make-or-break period in which her seven-year tenure is likely to come under intense scrutiny.

The company made an investment return of 1.4 per cent during the period ending 30 June, leaving it 29th out of 36 in a ranking of its peers that includes the likes of Witan and Scottish Mortgage. After talks with shareholders – including Elliott – the group said it now plans an overhaul of its operations in the autumn.

“Short-term numbers are just that. Much of the underperformance occurred in June, when the sharp rise in bond yields affected the return,” Ms Garrett-Cox said. “Looking ahead, it is clear that the uncertain outlook for both Greece and China has the capacity to affect equity markets for some time to come.”

Alliance said it had reduced the number of holdings in its equity portfolio to below 70. “This is a historically low number and illustrates our confidence in our investment process. This concentration means that we are putting higher levels of conviction behind every holding and we are confident that this will deliver superior returns in the long term,” she added.

The results round off an eventful six months for Alliance, the high point of which was in April when the investment trust reached an 11th-hour compromise with Elliott by agreeing to appoint two of the three City figures the activist wanted on its board. In a terse statement, its chair Karin Forseke, said: “Anthony Brooke and Rory Macnamara have joined the board. Our ongoing search for a further non-executive director is also progressing well.”

As part of the compromise, both parties agreed not to criticise each other publicly until after next year’s annual meeting.

The climbdown angered many retail investors, who control 70 per cent of the business. One shareholder at the group’s annual general meeting in Dundee likened the compromise to “letting the foxes look after the henhouse”.

At the time, Alliance admitted that the cost of appointing advisers to defend against this had cost £3m – the same amount it spent fending off previous assaults by rebel investor Laxey.

Shares in Alliance edged up 1.2p to 495p.