Cost of Alliance Trust share buyback drive hits £175m

Latest figures from the company revealed the cost of the concerted action embarked upon following a pledge to use buybacks to reduce the discount, or gap, between the Trust’s share price and its Net Asset Value (NAV).

Buybacks are a method to control discounts by reducing excessive supply of stock.

Buying back and cancelling shares cuts the number of shares in existence, raising the value of remaining shares.

Six months ago, the Trust committed itself to share buybacks to achieve single-digit discount between its share price and NAV.

The £2.6 billion fund’s strategy seems to be working, with the discount falling from 12.6 per cent to 7.8 per cent, although it is presently at 10.6 per cent.

Since October 2015 the Trust’s shares have climbed from 467p to 517.5p, slipping back slightly last night to close at 503p.

The process to improve performance was triggered by pressure from largest single shareholder Elliott Advisers which also saw the removal from the board of chief executive Katherine Garrett-Cox.

In the half-year to the end of March 2016, the Trust has bought back a total of 35.1 million shares at a cost of £174.5m.

A spokesman for the Trust said: “Share buybacks, combined with ongoing strong investment performance, has proven to be effective in helping to narrow the discount to NAV.”