Paul Singers’ Elliott Advisors succeeded in pushing changes at Alliance Trust, one of the largest investment trusts in the United Kingdom.
Today, the investment trust announced significant changes to its business including asset allocation, cost reduction, board structure among others to enhance shareholder value.
Michael Mauboussin: Here’s what active managers can do
Alliance Trust simplifies board structure
Alliance Trust decided to simplify its board structure. According to the company, its board will become fully independednt and will be solely composed of non-executive directors. It will also create an independent for ATI and Alliance Trust Savings (ATS) to increase focus and accountability.
Susan Noble will serve as Chairperson for ATI. She will retire from the board of Alliance Trust once the new arrangements take effect.
Katherine Garret-Cox will continue to serve as the chief executive officer and a director of ATI. She will step down from the board of Alliance Trust.
Alliance Trust also announced that its Chief Financial Officer, Alan Trotter resigned to continue his career in another publicly listed company elsewhere.
The investment trust has long been confronting pressure from shareholders including Elliott Advisors to address its underperformance and the gap between the value of its shares and assets.
In April, Alliance Trust agreed to the demand of Elliott Advisors to expand the number of its board of directors to prevent a shareholder vote on the issue during its annual general meeting. The investment trust appointed two the three directors supported by the activist hedge fund.
Elliott has been pushing Alliance Trust to improve its performance and reduce its discount to net asset value. The activist hedge fund owns 14% stake in the investment trust.
Alliance Trust asset allocation, cost reduction/discount policy
Alliance Trust said it will increase its focus on global equities, and it will also sell its fixed income, legacy mineral rights and property assets as soon as possible.
Additionally, the investment trust will reduce costs and targets an ongoing charges ratio of 45bps or less (including ATI’s investment management charge of 35bps) for 2016, down from 60bps last year.
Alliance Trust aims to accelerate ATI’s profitability by implementing a cost reduction program and focusing on continued growth of third party assets. The investment trust is expecting cost efficiencies of around £6m per annum.
Furthermore, Alliance Trust said its initiatives are expected to improve its investment performance and reduce discount into single figures. It is committed to implement share buybacks to pursue its objective. The board intends to maintain its progressive dividend policy.