The turnaround in the investment performance of Dundee-based Alliance Trust is “finally” being appreciated in the markets, the chief executive says.
Katherine Garrett-Cox said major restructuring at the £3.2 billion West Marketgait-based operation over the past five years had delivered for shareholders, and confidence had grown as a result.
She described the Trust’s performance in the five years before the changes were implemented as “awful” new analysis of the numbers show AT produced the poorest returns in the sector between 2003 and 2008 but said the position had now reversed.
AT yesterday revealed its latest results for the six months to June 30, which showed it had achieved net asset value (NAV) total return of 12.5% and total shareholder return of 15.2%.
The Trust said it had outperformed the Global Growth sector in the period, respectively ranking 14th and 11th out of 35 peer funds on both measures.
The discount to NAV, a concern for some shareholders in recent years when it was consistently above 17%, has narrowed significantly and has been below 15% every day in 2013 so far. It has since fallen further and was at 13% yesterday.
The Trust said it was on track to deliver its 47th annual increase in the dividend, with an above-inflation rise of at least 3% to 9.54p per share.
Ms Garrett-Cox said the latest results represented a strong performance in a challenging marketplace and were further proof of the progress the Trust had made.
She said: “Investment performance now for six-month period after six-month period has been ahead of the market, and people have finally started to understand that we have really turned this thing around it has been a major work in progress for five years now.”
A major rationalisation of the equity portfolio, which has seen the Trust reduce its overall number of holdings but increase the size of its stake in chosen companies, has been a key change.
The company has also focused on improving the performance of its two main savings and investment subsidiaries.
Alliance Trust Savings, which was first established in 1986, has been restructured and returned to profitability on a month-by-month basis late last year.
The Trust yesterday said ATS had generated a £200,000 operating profit in the first six months of 2013 and was positioned for a positive full-year return.
Alliance Trust Investments which saw losses narrow by £1 million to £1.7m in the first half has £1.9bn of assets under management, and the firm said it was on track to complete the transition of former Aviva funds into the business and relaunch them as ATI-branded funds.
Ms Garrett-Cox said she was pleased with the progress but cautioned stock market volatility meant the outlook remained challenging.
She said: “The equity portfolio remains the key driver of performance and has enabled us to navigate the choppy waters of financial markets, which rose sharply in the first quarter of the year before suffering a dramatic, short-term correction in the last six weeks of the period.
“We expect this market volatility to continue and the outlook for the rest of the year remains challenging. Investors are anticipating a likely change in policy towards quantitative easing in the US, and look for clarity of policy from the new governor of the Bank of England.
“However, we are confident that our bottom-up, long-term global approach to stock selection will help us identify and invest in the companies that can thrive in this environment.”
Shares in Alliance Trust closed the day down 1% at 441.5p.