Update on New Approach to Investment Management
- Details of the Equity Managers
- General Meeting to be held on 28 February 2017
On 15 December 2016, the Board of Alliance Trust set out a proposed new approach to managing the Trust's equity portfolio, with the aim of increasing the likelihood of consistently delivering the performance target and maintaining its dividend track record.
The Trust's objective will remain to generate a real return for shareholders over the long-term by a combination of capital growth and a rising dividend. The Board is proposing that Willis Towers Watson (WTW), a leading investment group, will become the investment manager[1], working with eight[2] equity managers, each of whom is rated best-in-class[3] by WTW. Each manager will typically select 20 stocks, which will make up the combined portfolio of the Trust. This distinctive approach means that every stock selected is one in which the equity managers have their highest conviction i.e. those investments they believe are most likely to deliver positive absolute and relative returns. WTW will maintain overall oversight of the combined portfolio, including income, risk and concentration characteristics.
Craig Baker, CIO of WTW, will lead a highly experienced team responsible for the combined portfolio, with David Shapiro and Mark Davis as co-portfolio managers and Stuart Gray as the lead researcher. WTW has a long track-record of successfully managing multi-manager portfolios, and in particular has extensive experience of working with managers to create concentrated portfolios.
In light of the Board's confidence in the new approach, the target for the equity portfolio to outperform the existing benchmark, the MSCI All Country World Index, will be doubled from 1% to 2% p.a., net of costs, over rolling three-year periods. Alongside this enhanced target, the Board reaffirms its commitment to the existing progressive dividend policy. This aims to generate a growing revenue stream from the portfolio, which will allow the Trust to continue its 49-year track-record of increasing dividends year-on-year. Further, by leveraging the scale of Alliance Trust and WTW, total annual costs will be targeted to be below 60bps[4]; a highly competitive rate for an investment trust offering access to such best-in-class3 managers and targeting this level of outperformance.
Selection of Equity Managers
Alliance Trust is today announcing the names of the eight equity managers selected by WTW.
| Equity Manager | Lead Individuals | Location |
| Black Creek Investment Management | Bill Kanko | Toronto |
| First Pacific Advisors | Pierre Py and Greg Herr | Los Angeles |
| GQG Partners | Rajiv Jain | Fort Lauderdale |
| Jupiter Asset Management Limited | Ben Whitmore | London |
| Lyrical Asset Management | Andrew Wellington | New York |
| River and Mercantile Asset Management | Hugh Sergeant | London |
| Sustainable Growth Advisers | George Fraise, Gordon Marchand and Rob Rohn | Stamford |
| Veritas Asset Management | Andy Headley | London |
In selecting equity managers, WTW studies a number of criteria to assess the competitive advantage of each manager and whether that advantage is likely to be sustained. These many criteria include: the calibre of the key people; stability of the team; the depth of fundamental analysis involved in investment decisions; and, specifically for Alliance Trust, evidence of skill in managing concentrated mandates. Out of a universe of 2,800 equity managers and 16,500 products that WTW have access to information on, they have conducted formal research on 3,700 products, with only around 40 'global equity' products receiving their highest rating. WTW believes that these eight managers, which all received the highest rating, together will create a highly compelling equity portfolio where long term returns relative to benchmark will be primarily driven by stock selection rather than macroeconomic factors.
Lord Smith of Kelvin, Chairman of Alliance Trust, said: "Alliance Trust has provided investors with attractive returns and income through many generations. Our ambition is to ensure that it continues to do so, thereby remaining a core holding.
Under the new approach, Alliance Trust will offer access to best-in-class managers, which, together with a focus only on their best investment ideas, will help to increase the likelihood of consistently delivering improved performance over the long-term.
We are confident that this new approach, and the managers selected, will meet our ambition and deliver for many more generations to come and we recommend shareholders vote in favour at the General Meeting."
Further Detail on the Equity Managers and Lead Individuals
Black Creek Investment Management (Black Creek) - Toronto, Canada (www.bcim.ca)
Bill Kanko is founder and President of Black Creek, with 35 years' experience in the industry. Prior to founding Black Creek in 2004, Bill was the lead manager for the AIM Trimark Fund and Trimark Select Growth Fund, which had outstanding performance during his leadership from 1999 to 2004.
Bill is a long-term investor, looking for companies that are growing, are leaders in their markets and gaining market share. These companies tend to benefit from huge barriers to entry and sustainable competitive advantages. In Morningstar's Canadian database, the Black Creek Global Leaders Fund ranks in the top 2% of funds in the global equity category over a five-year period and the top 3% over a ten-year period.
First Pacific Advisors, LLC (FPA) - Los Angeles, USA (www.fpafunds.com)
Pierre Py and Greg Herr, who have an average 20 years' experience in the industry, have worked together at FPA since 2011. Pierre, Managing Director, previously worked at Harris Associates, Salomon Brothers, and Goldman Sachs.
Pierre and Greg typically employ a long-term value investment approach, investing in companies that they believe have sustainable business models, exhibit financial strength, are run by operationally strong managers and whose stocks trade at a significant discount to the FPA team's estimate of intrinsic value. For Alliance Trust the team will look to balance this discount with the businesses' ability to produce an attractive and sustainable dividend yield. A number of FPA's funds have been recognised for their performance by organisations including Morningstar and Lipper.
GQG Partners, LLC (GQG) - Fort Lauderdale, USA (www.gqgpartners.com)
Rajiv Jain is the Chairman and Chief Investment Officer of GQG and serves as the sole portfolio manager for each of the firm's strategies. With 20 years of emerging markets experience, Rajiv is among the longest tenured investors in global and emerging markets equities. He launched GQG in June 2016, having previously worked at Vontobel Asset Management for 22 years; as co-CEO (from July 2014) and Chief Investment Officer and Head of Equities (from February 2002). He was named Morningstar International Fund Manager of the Year in 2012.
Rajiv looks for high-quality and sustainable businesses through a fundamental investment process utilising both traditional and non-traditional sources of information. Ideally, these quality businesses have enduring underlying strengths, which manifest in a variety of economic environments. The result has been portfolios designed to provide capital protection in down markets and attractive returns to long-term investors over a full market cycle. GQG will manage a global portfolio for the Trust with particular focus on emerging market companies.
Jupiter Asset Management Limited (Jupiter) - London, UK (www.jupiteram.com)
Ben Whitmore, who has 20 years' experience in asset management, joined Jupiter in 2006 from Schroders. Ben will be supported by Dermot Murphy, who has worked at Jupiter since 2014.
Ben is well known as a long-standing practitioner of contrarian value investing, investing in companies he considers to be out-of-favour and under-valued. This approach has proved successful with the Jupiter UK Special Situations Fund being top quartile in its sector over 1, 3, 5, and 10 years.
Lyrical Asset Management (Lyrical) - New York, USA (www.lyricalam.com)
Andrew Wellington serves as the firm's Chief Investment Officer and Managing Partner, and has been involved with active portfolio management for over twenty years, with the last eight at Lyrical. He previously worked at Neuberger Berman where he became the sole portfolio manager for the institutional US mid-cap value product, more than tripling AUM. Andrew will be supported by Caroline Ritter.
Value matters most to Lyrical and the team also maintains a strict discipline of investing in quality companies that they believe are relatively easy to analyse. They believe the combination of value, quality, and straightforward business model creates resiliency in the portfolio and the greatest likelihood of long-term absolute performance and outperformance. In April 2015 Lyrical received the Long Biased Equity Fund - Long Term Performance award at the annual 2015 Investors Choice Awards.
River and Mercantile Asset Management (River and Mercantile) - London, UK
(www.riverandmercantile.com)
Hugh Sergeant is the Chief Investment Officer of Equities at River and Mercantile and was one of the founding Partners in 2006. He has over 30 years' experience and was previously Head of UK Equities at Societe Generale Asset Management and prior to that at UBS/Phillips & Drew and Gartmore.
The team invest in Recovery Equities, through an investment philosophy called PVT (Potential, Valuation & Timing) and a process that helps them identify value at different stages of a company's lifecycle and to give signals from a timing perspective as to when that value might be unlocked. Hugh's performance against his peer group has been strong and his UK and World Recovery portfolios are both ranked in the top decile of returns within their IA universe since inception.
Sustainable Growth Advisers (SGA) - Stamford, USA (www.sgadvisers.com)
George Fraise, Gordon Marchand and Rob Rohn founded SGA in 2003 and average over 30 years' investment experience each, having also worked together before SGA. While the team shares a common approach to evaluating businesses and structuring portfolios, the personality attributes of the three portfolio managers are complementary in important ways.
SGA focuses on building concentrated portfolios of unique, high quality global growth businesses that possess strong pricing power, offer recurring revenue generation and benefit from attractive, long runways of growth. SGA's global growth equity portfolio had achieved a top decile in the Morningstar World Stock Category since inception, while their Global Mutual Fund was featured by Morningstar as one of five 'Under-the-Radar' and 'Up-and-Coming Funds' on 15 November 2016.
Veritas Asset Management (Veritas) - London, UK (www.veritas-asset.com)
Andrew Headley has over 20 years' investment experience and is supported by co-portfolio manager Charles Richardson. They have worked together for almost 20 years including the last 13 years at Veritas, since founding the business in 2003.
Veritas focuses on active equity management, utilising its proprietary Real Return Approach since inception of the firm. Veritas employs an absolute mind-set when valuing companies and dispenses with any reference to indices when constructing the portfolio. Veritas describe the firm's overall approach as investing in a concentrated portfolio of good quality companies at the right price. The Veritas Global Focus Fund carries a Morningstar five-star gold rating.
Dates of General Meeting and Shareholder Forums
As previously announced, shareholders are being given the opportunity to vote on the new approach at a General Meeting, which will be held on 28 February 2017 at 14.30, at the Edinburgh International Conference Centre. In order to vote on the new investment approach, shareholders will be required to attend the General Meeting, or complete relevant proxy forms ahead of time. Documentation for the General Meeting will be posted in due course.
Ahead of the General Meeting, the Board will host informal Shareholder Forums to provide shareholders with an opportunity to ask questions of a number of Alliance Trust's Directors, and Craig Baker and David Shapiro of WTW, on the new investment approach. Details of the Shareholder Forums are as follows:
- London - 14.30, Wednesday 25 January - The Institution of Engineering and Technology, 2 Savoy Place, London, WC2R 0BL
- Dundee - 14.00, Friday 27 January - The Sidlaw Suite, West Park, 319 Perth Road, Dundee, DD2 1NN
- Edinburgh - 14.30, Monday 30 January - Edinburgh International Conference Centre, The Exchange, 150 Morrison Street, Edinburgh, EH3 8EE
A recording of a Shareholder forum is expected to be posted on the Alliance Trust PLC website (http://www.alliancetrust.co.uk/) once all three have concluded.
Contact Details
For more information, please contact:
Lord Smith of Kelvin, Chairman
Gregor Stewart, Deputy Chairman
George Renouf, Director of Investor Relations
Alliance Trust PLC
T: 020 7353 4200 (on the 16 January 2017)
T: 0131 322 3357 (thereafter)
Andrew 'Z' Zychowski
Robbie Robertson
David Yovichic
Canaccord Genuity
T: 020 7523 8000
Stephen Malthouse
Martin Pengelley
Tulchan Communications
T: 020 7353 4200
Craig Baker
David Shapiro
Willis Towers Watson
T: 020 7170 2000
Notes to Editors
About Alliance Trust PLC
Alliance Trust PLC is one of the largest generalist investment trusts by market value listed on the London Stock Exchange, having been founded in Dundee in 1888. As at the end of December 2016, Alliance Trust PLC had total assets of £3.3 billion.
Alliance Trust's focus is on investing in global equities for the long term to deliver enhanced returns for shareholders.
Alongside growth opportunities, income generation is a vital part of the investment process. As one of only four companies in the FTSE All-Share to have grown its dividend for 49 years, Alliance Trust's ambition is to continue to outperform in this area.
About Willis Towers Watson Investment
Willis Towers Watson Investment is a leading investment business that is focused on creating financial value for investors through its expertise in risk assessment, strategic asset allocation, manager evaluation and investment management. It has over 900 investment associates worldwide, assets under advisory of around US$2.3 trillion and over US$87 billion of assets under management. It is part of Willis Towers Watson (NASDAQ: WLTW) which has over 39,000 employees in more than 120 territories and has roots dating to 1828.
The business has worked, for many years, with equity managers to create tailored high-conviction portfolios for large institutional clients, with notable success over more than ten years for a large US charitable foundation. More recently it launched an open-ended, high-conviction multi-manager vehicle for institutional investors, the Global Equity Focus Fund, which has outperformed the MSCI World index by 2.7% per annum (3.9% cumulative) from inception on 17 August 2015 to the latest date available 11 January 2017, net of all underlying manager fees and fund expenses. These are provisional figures.
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[1] Towers Watson Investment Management (Ireland) Limited to be appointed as Alternative Investment Fund Manager
[2] Initial number of managers selected
[3] As rated by Willis Towers Watson
[4] At current size