After a very public spat with one of Alliance Trust’s major shareholders, activist hedge fund Elliott Advisors, the listed investment company has made major changes to its board structure and mandate.
According to a note from Investec, Alliance Trust has made changes to enhance shareholder value and better position the company to deliver outperformance in a cost-effective manner.
The main issue Elliott had with Alliance Trust was the appointment of two non-executive directors to the board, which the latter did not want in place. In a major reversal, Alliance Trust’s board is to become fully independent, consisting solely of non-executive directors. Chief executive Katherine Garrett-Cox is also stepping down from the board having led the fight against Elliott.
The firm’s investment mandate will now focus on global equities with a disposal of non-core investments. The MSCI All Country World Index is to be used as a formal benchmark. In the event that performance does not consistently deliver against the new benchmark, a full review will be undertaken and external managers considered.
Alliance Trust is also trying to reduce costs, targeting an ongoing charges ratio of 45 basis points (bps) or less by the end of 2016; it was 60 bps in 2014. This is combined with a cost reduction programme aimed at delivering savings of £6 million for 2016.
The company has a tight deadline to deliver these changes, they have to be made no later than March 2016 subject to Alliance Trust Investments obtaining regulatory permissions under the Alternative Investment Fund Managers Directive.
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