Alliance Trust: a victory for shareholder activists

published 30 April 2015

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.

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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."

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.