Alliance Trust board remains defiant as slump persists

The pledge came as the company dropped into the bottom quarter of funds based on performance.

Net asset values rose by just 1.4 per cent for the six months ending June, but shareholders received just a 2.7 per cent increase, well behind similar peer funds.

Over the same period rivals such as Witan returned 4.64 per cent and Scottish Mortgage added 5.32 per cent.

The company was caught in the broad-based bond sell off earlier this year and has since moved much of its portfolio into equities after suffering from fierce bond market sell-offs in June.

It has also cut the number of holdings from 88 a year ago to 68.

The Trust was forced to put two candidates from hedge fund Elliott Advisors on the board earlier this year due to shareholder pressure and is currently looking for a third non-exec to join Elliott’s nominations.

“The first half of 2015 was a particularly challenging period for Alliance Trust,” chairman Karin Forseke said. “In the run up to our AGM a significant proportion of our shareholder base indicated that they sought change.

“The board anticipates announcing, in the autumn, the changes that it intends to make.

Chief executive Katherine Garrett-Cox, whose pay package was also criticised by the US hedge fund during its Spring offensive, acknowledged the results were “disappointing”.

“A number of stocks that have yield characteristics got hit quite hard by the backup in EU bond yields. We still believe they are good companies but short-term market volatility is hard to predict,” she said. “It was a timing issue in many ways.”

In net asset value terms the trust returned 1.4 per cent, below its main benchmark, the MSCI All Country World index, at 1.53 per cent.

Ms Forseke added: “The board has listened to these concerns and is actively engaged in addressing them. The board anticipates announcing, in the autumn, the changes we intend to make.”

Ms Garret-Cox said the trust had not ruled out moving to external management of the trust. “We’ve spent the last few months in a very open and constructive debate. We’re looking at everything.”

Alliance Trust’s equity portfolio outperformed its benchmarks and it has now increased borrowing to about 15 per cent in order to achieve equity exposure of 100 per cent. However, it warned that threats posed by the Greek debt crisis and Chinese market crash would continue to loom over equity markets.