Alliance Trust: a victory for shareholder activists

Alliance Trust’s surrender marks the biggest victory yet for shareholder activists in Britain.

Alliance Trust, Britain's biggest investment trust, has reached a last-minute deal with Elliott Advisors, a US activist hedge fund that is the trust's largest investor. Elliott, irked by what it viewed as high fees, an inflated salary for the chief executive and poor investment returns, had led a campaign to bring fresh blood into the board.

A vote on its proposals was scheduled for the trust's annual general meeting on 29 April. However, a day before the AGM, Alliance headed off the vote by agreeing to put two of Elliott's three nominees on the board in return for a ceasefire until next year's annual meeting, in May 2016.

What the commentators said

Last weekend, Alliance's CEO Katherine Garrett-Cox was quoting Churchill and looking forward to victory. That was "asking for trouble", said Alistair Osborne in The Times. She folded after the first sign of defeat.

The deal, which saw a 12.2% shareholder get most of what it wanted, reflects how support for Garrett-Cox must have been draining away. She and the board realised that she was going to lose the institutional shareholder vote, representing around 30% of the total, while the vote from retail shareholders was on a knife-edge.

"A negotiated retreat became the board's least embarrassing option," said Nils Pratley in The Guardian. There will now be a truce lasting a year. So in essence the 127-year-old trust "has given itself 12 months to demonstrate that it deserves to exist in its current form".

All the important issues, ranging from the trust's discount to high salaries and distracting subsidiaries, will now at least be discussed, which bodes well for investors hanging on, as MoneyWeek's Merryn Somerset Webb noted in her blog. "The shares might offer some value."

Recommended

The pick of this year's best-performing investment trusts
Investment trusts

The pick of this year's best-performing investment trusts

Market conditions haven’t been easy, but these investment trusts have delivered strong growth, says David Stevenson.
23 Sep 2022
Three top-notch Asian stocks to buy
Share tips

Three top-notch Asian stocks to buy

Professional investors Adrian Lim and Pruksa Iamthongthong, managers of the Asia Dragon Trust, pick three of their favourite Asian stocks to buy now.
23 Sep 2022
Why you should short this satellite broadband company
Trading

Why you should short this satellite broadband company

With an ill-considered business plan, satellite broadband company AST SpaceMobile is doomed to failure, says Matthew Partridge. Here's how to short th…
23 Sep 2022
Share tips of the week – 23 September
Share tips

Share tips of the week – 23 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
23 Sep 2022

Most Popular

Beating inflation takes more luck than skill – but are we about to get lucky?
Inflation

Beating inflation takes more luck than skill – but are we about to get lucky?

The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank…
26 Sep 2022
The pick of this year's best-performing investment trusts
Investment trusts

The pick of this year's best-performing investment trusts

Market conditions haven’t been easy, but these investment trusts have delivered strong growth, says David Stevenson.
23 Sep 2022
The hidden cost of employee share schemes
Investment strategy

The hidden cost of employee share schemes

Paying employees in shares comes at a cost to investors – but it isn’t always easy to see how much, says Stephen Clapham.
26 Sep 2022