Alliance Trust begins share buyback push

That six month report included wide-ranging changes to the structure of the firm and saw chief executive Katherine Garrett-Cox kicked off its main board.

In the wake of the shake-up, this week has seen the £2.6 billion fund spend £1.9 million buying nearly 400,000 of its shares. This fulfils a promise it made on 1 October to use buy backs to reduce the discount – or gap – between its share price and the trust’s underlying net asset value.

Last week’s announcements, which saw Garrett-Cox demoted to run the Alliance Trust Investments subsidiary and the board commit to clearer performance targets and to cut costs, had an immediate impact on its shares, narrowing the discount from 12 per cent to just over 10 per cent.

However, this remains more than double the average of other Global Growth trusts.

In its 1 October statement Alliance committed itself to the ‘active use’ of share buybacks to achieve a single digit discount.

Charles Murphy, investment company analyst at stockbrokers Panmure, said the move suggested Alliance was taking a ‘more systematic’ approach to controlling the discount.

The inclusion of ‘active’ strengthened an earlier commitment from Alliance to the ‘on-going flexible use’ of buybacks. Yet, with the company giving no further information on its policy and stressing its belief that improved investment performance was the most effective way of re-rating the stock, it looks unlikely Alliance will return to the high levels of buy backs it made a few years ago.

“It looks like they’re buying sufficient stock to maintain the single digit,” said Murphy, adding: “They’re in a holding pattern.”.