The chairman of Dundee investment firm Alliance Trust said the performance of its stock-pickers has been “disappointing but understandable” at its annual general meeting.
Around 100 people attended the first in-person AGM since 2019 at Apex City Quay Hotel in Dundee.
It was held just days after the five year anniversary of the multi-billion portfolio being managed by Willis Towers Watson (WTW).
In this time, shareholders have seen net asset value returns averaging 9.8% a year.
However, this has been an underperformance of around 0.4% a year against the MSCI All Country World Index.
Willis Towers Watson aims to outperform this benchmark by 2% a year after costs.
Alliance Trust focus on long-term
Chairman Gregor Stewart said the outperformance was due to stellar growth from extremely large companies, mainly US tech stocks.
He said: “Our portfolio includes some of these stocks but it doesn’t mirror the concentration in the index.
“The board views this relative underperformance as disappointing but understandable.
“Alliance Trust performs better when global returns are less concentrated. Our focus is on long-term company fundamentals.”
Mr Stewart said he is confident Alliance Trust will outperform the benchmark in the future.
“When the market stabilises the potential of the stocks we own will be realised,” he added.
Dividend increase ‘affordable’
Meanwhile the company has extended its record of dividend increases, as it has done for 55 years.
Mr Stewart acknowledged there had been a mix of views among shareholders as the dividend saw a large 32.5% increase.
“The overall message is that dividends were valued by investors and an increased level would be preferred if it’s affordable,” he said.
“We believe the increased dividend reinforces the company’s objective to provide shareholders with a real return through a combination of capital growth and a rising dividend.”
Russian stocks sold
Addressing the 134th AGM, Craig Baker, global chief investment officer of Willis Towers Watson, said adjustments to the portfolio had been made due to the Ukraine war.
He said in the run up to the Russian invasion Alliance Trust had disposed of the small number of Russian shares it owned “before sanctions came in and liquidity dried up in the market”.
He said: “We also mandated to managers that no further exposure could be made in those markets (Russia and Belarus) for the foreseeable future.”
Mr Baker said the direct impact of the war to the Alliance Trust portfolio is “negligible”.
“The bigger question is the indirect impact it will have on markets generally,” he said.
“Russia and Ukraine are quite important in a number of commodity and energy sectors.
“This is exacerbated some of the issues we were having before the crisis, such as inflation.
“A number of supply chain issues have been exacerbated as well and there’s potential for further geopolitical tensions.
“We have designed the portfolio to not be that exposed to macro events like this.
“Stock selection drives everything – we don’t have big geographical positions or sector positions.”
He struck an optimistic note for the future performance of Alliance Trust.
He said: “We are seeing really good earning progression in the companies we are owning and are confident that will come through to the share price.”
Alliance Trust AGM resolutions pass
All the resolutions at the AGM were passed by more than 98% of shareholders including the re-election of chairman Gregor Stewart and board members Sarah Bates, Anthony Brooke, Dean Buckley, Jo Dixon and Clare Dobie.
Board member Chris Samuel did not reek re-election.
