Alliance Trust tells Elliott Advisors directors: You’re male, pale & stale

Tim Wallace
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Alliance Trust chief exec Katherine Garrett-Cox
Alliance Trust is preparing a campaign against the three industry veterans its biggest shareholder is trying to get voted on to the board, City A.M. understands – arguing that the experienced bosses do not match the firm’s modern, creative model.

Activist investor Elliott Advisors is engaged in a fierce battle of wills with the FTSE 100 firm, as it vies to shake up the board and push the investment group in a new direction.

The board and executives are expected to warn investors that the three represent an old style of running a fund, which would be out of touch with what management sees as Alliance’s more innovative style.

And the incumbent bosses will also want to dispel Elliott Advisors’ claim that the trio is independent, arguing that the activist fund could have undue sway over their decisions, should they reach the board.

“They’ve done a lot in their careers, but they’re not hugely current individuals,” said an Alliance Trust insider.

“In terms of Alliance building businesses, creating things, being very innovative... you would think it would want a very diverse, very forward thinking, current board.”

Elliott argues that Alliance Trust’s returns are too low, and that adding three new directors will help challenge the strategy of executives, led by chief exec Katherine Garrett-Cox.

The fund said it has spent several years in talks with the board, but that their concerns have not been adequately dealt with, leading it to hire headhunters Spencer Stuart to find the trio.

It has proposed former Legal and General Investment Management boss Peter Chambers, ex-SG Warburg exec Anthony Brooke, and former Morgan Grenfell executive Rory Macnamara to join the top table.

In an open letter to fellow shareholders earlier this week, Elliott said the proposed appointments would add “experience, independence and a fresh perspective to the board.”

But the existing board is understood to be suspicious of Elliott’s motives, and expects this move would develop further into a bid for control of the company.

In 2012 Alliance Trust faced two other challenges from activists, with Laxey Partners and Aberdeen Asset Management both trying to force it to change strategy.

Both previous efforts failed, and Elliott’s more indirect approach has raised suspicions at the top of the FTSE 100 firm.

The board has not yet given its recommendation to shareholders on which way to vote.

In part the delay may have arisen because the move is being proposed by an investor with a 12 per cent stake, giving it clout, and the board will want to listen to investors.

Elliott’s analysis of the firm concluded that returns are poor, and weak governance is part of the problem.

“Our concerns include the persistent underperformance of Alliance Trust’s investment portfolio against its sector peers and relevant benchmarks; [and] the high and inflexible nature of the cost of the trust’s internal investment management function,” it said to investors.

Alliance’s board disagrees with the assessment, and is also expected to present shareholders with evidence that it is currently on the right track – for instance, its shares hit a record high earlier this year.

Both Elliott Advisors and Alliance Trust declined to comment.

Alliance Trust’s shares are up 5.4 per cent since the row started this week. Even before the clash they had risen 3.8 per cent in the year to date.

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