Alliance Trust CEO Garrett-Cox to Leave, Board Promises Continuity

The Board of Alliance Trust Plc announced yesterday that it was agreed that Katherine Garrett-Cox, the CEO of Alliance Trust Investments, is to leave the firm on March 11

David Holder 16 February, 2016 | 3:35PM

The board of Alliance Trust Plc has announced that, following discussions between themselves and the board of Alliance Trust Investments, the asset management arm of the business, Katherine Garrett-Cox will be leaving the firm on March 11 2016 after nine years at the company. Morningstar Analysts are retaining the Neutral rating held by Alliance Trust Investment Trust (ATST).

Katherine Garrett-Cox Departs

The Board of Alliance Trust Plc announced yesterday that, after discussions between themselves and the board of Alliance Trust Investments, it was agreed that Katherine Garrett-Cox, the CEO of Alliance Trust Investments, is to leave the firm on March 11. This development is not entirely surprising and comes on the back of sustained efforts by US activist investor Elliott Associates to prompt the board of Alliance Trust Plc to undertake a thorough review of the investment trust's management.

In October last year, a restructuring of the Plc Board saw Garrett-Cox relinquish her title of CEO of the investment trust, as well as her seat on the board. At that time, she became CEO of Alliance Trust Investments, the asset management division and appointed manager of the investment trust's assets.

Soon after on November 27, it was announced that Karin Forseke, a staunch supporter of Garrett-Cox, would be stepping down as Chairman of Alliance Trust Plc on January 1 2016, and Alastair Kerr would be stepping down from the board on the same date. On 14 January 2016, it was confirmed that Robert Smith, Lord Smith of Kelvin, would take over as Chairman on February 1 2016, subject to regulatory approval.

The Alliance Trust Plc Board is now wholly non-executive and comprises the chairman and deputy chairman, together with five non-executive directors including Rory Macnamara and Anthony Brooke.

These latter two were appointed in June 2015 at the behest of Elliott Associates. The Board now has an average tenure of just 1.5 years reflecting the significant changes seen here in recent months. 

Elliott Associates' stake in the investment trust remains a strong influence, with an ownership stake of approximately 15% through a mix of shares and contracts for difference.

The Future of Alliance Trust Investments

Alliance Trust Investments manages over £5.3 billion of assets, of which the Alliance Trust Investment Trust accounts for £3.3 billion. The management agreement between the respective entities in respect of the investment trust is terminable on six months’ notice by either party.

Garrett-Cox's responsibilities will be divided between Peter Michaelis and Ramsay Urquhart. Michaelis takes the investment responsibilities. He joined the firm in August 2012 after an 11-year stint at Aviva Investors, where he became head of sustainable and responsible investment.

The operational duties will be the responsibility of Urquhart, as Managing Director of Alliance Trust Investments. He joined the firm in 2013.

Cost Reductions

The ongoing focus at Alliance Trust Investments is on reducing costs within the business for the benefit of shareholders in Alliance Trust Plc. The trust's board is targeting an ongoing charges figure of 45 basis points by the end of 2016; with ongoing charges of 60 basis points in 2014, the fund is already very competitive among its Morningstar GBP Aggressive Allocation category peers. As part of their cost-saving and value-enhancing initiative, the board will review the non-core asset holdings in the portfolio.

In addition, shareholder returns are formally measured against the MSCI All Companies World Index and the board and fund manager target 1% annual outperformance net of fees. The dividend policy will emphasise steady and progressive dividends over the current arrangement of paying ordinary and special distributions. Should these changes not lead to a narrowing of the discount then the board has indicated its willingness to keep the discount within single-digits and will use share buy-backs to support this aim.

Conclusion

Alliance Trust Investments has indicated that investors can expect continuity in the investment approach and process used to manage the investment trust subsequent to Garrett–Cox’s departure. We believe that the investment team should now be allowed to focus on meeting their objectives for the benefit of shareholders.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Alliance Trust Ord816.00 GBX-0.49

About Author

David Holder  is a senior investment research analyst at Morningstar

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