ALLIANCE TRUST: £3bn fund lives up to its name

Investment trust Alliance is a global fund that stands out. Rather than entrusting an individual asset manager to oversee the portfolio, it employs a number of experts from around the world to manage packages of the £3bn of assets under its care.

This multi-manager approach, overseen by financial advisor Willis Towers Watson, has worked to the benefit of shareholders.

Since WTW went public in April 2017, the portfolio has delivered a total return to shareholders of 62 percent. In contrast, the average global investment company has generated a total profit of 40 percent over the same period.

Stuart Gray is one of a three-person team at WTW that oversees the trust’s assets. Along with Craig Baker and Mark Davis, Gray appoints the managers who manage portions of the trust’s assets. They have the power to hire and fire, challenge the managers on their performance, and rebalance the portfolio so that no one owns too much of the trust’s money. What they cannot do is influence the stocks that the individual investment teams choose.

Gray says, “Our approach adds an extra layer of diversification. Our managers all bring something different to the investment party. They complement rather than duplicate. It means that we are not dependent on a certain investment style or a certain stock market for returns.’

The trust currently employs nine managers. Among them is Ben Whitmore of UK asset manager Jupiter (an expert in looking for undervalued stocks); Andy Headley at Veritas Asset Management (a global equity specialist); and Jonathan Mills and Simon Denison-Smith of Buckinghamshire Metropolis Capital (conviction global investors).

Of the eight investment teams chosen in 2017, only two — Los Angeles-based First Pacific Advisors and River & Mercantile — fell by the wayside. Three have entered: Metropolis and US-based Vulcan Value Partners and Sands Capital.

The dumped managers were not dropped for performance reasons, but because of a change of ownership in the case of River & Mercantile and the investment team that WTW used to decamp First Pacific to build their own investment operation. The complementary investment styles are reflected in the fact that of the 197 shares in the trust, only 15 are held by more than one management team. These tend to be large global stocks such as US tech giants Alphabet, Microsoft and Visa.

Gray believes that using managers with different investment skills gives the overall portfolio a certain amount of ‘resilience’.

“Equity experts are trying to make big calls across markets and sectors,” he adds. “Sometimes they get these decisions right. On other occasions, they don’t and lose money for investors. Our distribution of managers slows this down.’

In markets, Gray says it’s easy to make a (negative) argument: high inflation, rising interest rates and geopolitical tensions. But he adds that there are some positive signs investors shouldn’t ignore: a spike in inflation, the reopening of China’s economy and the end of some supply chain issues that have driven up costs.

A commitment to a rising dividend is an important part of the Alliance package. It has already raised its dividends for 55 consecutive years and is on track to make another increase for fiscal year 2022.

So far it has made three quarterly payments totaling 18 pence per share. This compares to payments for 2021 as a whole of 19.05 pence. The trust’s exchange ID code is B11V7W9 and ticker ATST. The total annual ongoing charges are 0.9 percent.