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Fund in Focus: Alliance Trust

Responsibility for the management Alliance Trust will be moving to Willis Towers Watson, where the trust will be run with a new mandate

Emma Wall 9 January, 2017 | 8:30AM


Emma Wall: Hello and welcome to Morningstar. I am Emma Wall and here with me today to discuss the significant changes at Alliance Trust (ATST) is Senior Fund Analyst, David Holder.

Hi, David.

David Holder: Hello, Emma.

Wall: So I think it would be worth having a quick recap of the last year for Alliance Trust because there has been as I said significant changes.

Holder: There have been significant changes in Alliance Trust. It seems like there's been significant changes at Alliance Trust for ages and ages actually. However, if we sort of just rewind to Q1 2016 when the Board was refreshed and a new Chairman was appointed. Since May 2016, the Chairman and Board have embarked upon a sort of consultation process, a review of the strategy of the company and just recently in mid-December have acknowledged and put forward their suggestions for how the company should be managed going forward.

Wall: And this sort of consultation process has culminated in the splitting of assets which the Alliance Trust Investment portion of the company was running and some of it has been sold to Liontrust and the other of it will be outsourced will it not?

Holder: Well, indeed, so the Alliance Trust Plc have come to an arrangement with Liontrust to sell to Alliance Trust Investment ATI. ATI were the investment arm of Alliance Trust Plc and so therefore Alliance Trust Plc will no longer have investment capability itself. And so what it's looking to do now is to outsource that investment capability to a third-party.

Wall: And so for the shareholders of the trust itself, Alliance Trust, who will then be running that fund?

Holder: Well, the Board proposing that the trust assets are managed by Willis Towers Watson who are an investment advisor and at the moment details are a little scarce however we understand Willis Towers Watson will suggest a number of global investment managers and those portfolios will be sort of knitted together to create a portfolio.

So, they will be around sort of 8 to 10 to 12 different global managers running concentrated portfolios as we understand it so maybe 20 stocks in each portfolio and those will form the basis – the majority of the basis of the trust assets going forward.

Wall: Now this sounds like a 100% turnover or churn of assets within Alliance Trust which means significant cost to shareholders potentially.

Holder: Quite possibly, inevitably there will be cost to shareholders in terms of legal administration charges and a such like and also there will trading costs also incurred. At the moment, we don't know what the implications of those costs will be. But going forward I think the Willis Towers Watson will be running a portfolio at reasonable cost and a figure that we hear is around 60 basis points a year which we think is reasonable value for an actively managed rather global portfolio.

Wall: And are there any trusts like this on the market because it's very different from what it was doing before and indeed, the proposal has called it differentiated as well.

Holder: The proposal has called it differentiated and somewhat it is differentiated. Witan investment trust (WTAN) runs something fairly similar, although there are a greater number of stocks within the Witan portfolio probably around twice as many as the 200 or so that we would expect to see once the portfolio is being rebalanced at Alliance Trust Plc. So, yes it does have some elements of differentiation.

Wall: David, thank you very much.

Holder: No problem.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

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
Alliance Trust Ord805.00 GBX-0.12
Witan Ord217.00 GBX0.23

About Author

Emma Wall  is former Senior International Editor for Morningstar

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