Total triumph for activists at Alliance Trust as Karin Forseke calls it quits

Alliance’s six-strong board will have a completely new look going into the new year, compared with a year ago

Chairman Karin Forseke fell on her sword just two months after her ally and chief executive Katherine Garrett-Cox was demoted from the board

The US hedge fund Elliott Advisors sealed its rout of Alliance Trust yesterday as the last of the Scottish company’s old guard quit — putting the sleepy world of British investment trusts on red alert for more activist assaults.

Chairman Karin Forseke fell on her sword just two months after her ally and chief executive Katherine Garrett-Cox was demoted from the board of the 127-year-old, listed investment trust. Ms Forseke, a former Swedish banking boss, will step down on 1 January.

Compared with 12 months ago, Alliance’s six-strong board will have a completely new look going into the new year, underscoring the extent of the victory for the Elliott campaign.

Ms Forseke’s departure comes just weeks after another US activist investor, Sherborne, clinched a similar victory at the investment trust Electra Private Equity by forcing out chairman Roger Yates.

The success of the two raids will raise alarm bells on the boards at other investment trusts, which dominate the FTSE 250.

“It will signal to boards that they shouldn’t be complacent,” said one industry analyst. “Investors have been around this sector for a while but this has shown they can win these votes and force their hand.”

Stephen Peters, a fund manager at Charles Stanley, which owns Alliance shares, added: “I don’t think directors should be worried but it’s important that [they] should never underestimate investment trust shareholders. They may have a reputation for being a bit sleepy and not very activist, but that in itself is an opportunity for activists.”

Ms Forseke’s exit is a coup for Elliott, which has succeeded in overhauling the longstanding regime at Alliance after previous attempts by others failed. Activists Laxey Partners had previously tried to shake up the company in 2012 but lost a shareholder vote on ditching the company’s fund management services.

“It doesn’t come as a huge surprise,” said Numis analyst Charles Cade. “What was a surprise was that it didn’t happen just after [Elliott won two board seats].

“There was a substantial u-turn by the chairman and there could have been a knee-jerk reaction.”

The exit is the final chapter in a saga during which Elliott grabbed two board seats in April after a six-week campaign. Ms Garrett-Cox left the board in October to run Alliance’s fund manager.

Ms Forseke was appointed in 2012 and oversaw most of the trust’s sluggish performance over the next three years.

Alliance was targeted by Elliott partly because its shares traded at a steep discount to their net asset value.

The trust was formed in Dundee in 1888 and is typical of many in the sector in dating back to the Victorian era. Yet despite their fusty reputation industry defenders claim the vast array of investment trusts on the market (with exotic assets such as peer-to-peer lending, hedge funds and collateralised loan obligations) is evidence of the sector’s progressive nature.

Alliance was one of the standout progressives for its board make-up, having three female representatives on the board before Elliott started its assault.