Alliance Trust Results and Directors’ Pay Cuts

Very long-established investment trust Alliance Trust (ATST) issued its annual results for 2018 on the 1st of March. Total return for the year was minus 5.4% with its equity portfolio slightly behind its benchmark index. It put this down to not holding a “narrow group of very large companies”. That performance is similar to my own personal investment portfolio and better than a number of active managers so I hope investors will be satisfied with it after the past revolution at the company.

It is of course disposing of Alliance Trust Savings which finally managed to show an operating profit after many years of losses, and it is also getting shot of some private equity investments and mineral rights in North America. It’s basically returning to its roots as a simple global investment trust which will please many investors.

Citywire have highlighted that many of the directors are taking a pay cut, with Chairman Lord Smith seeing his annual pay reduced from £120,000 to £80,000, Deputy Chairman Gregor Stewart losing £55,000 as he will no longer be a paid director of Alliance Trust Savings. Other directors’ fees are also reduced. Do not be too concerned about Lord Smith’s descent into poverty though – he still has a couple of other well paid jobs.

The pay changes are a rational move because although it was necessary to pay highly to new directors for the effort required to sort out the mess that was the company before Elliott launched their bid for changes, and for the reputational risk if they failed, it is hopefully now more stable and more similar to other investment trusts who do not pay enormous amounts to their non-executive directors. The pay changes will undoubtedly please the many Scottish holders of shares in the trust.

I do hold a few shares in Alliance Trust. I consider it can now be one of those core holdings that any investor who does not wish to track every gyration of the market can hold.

The current share price discount to NAV is 4.4% which is acceptable but the company says it is considering how they can stimulate additional demand for the shares. Investment trusts often have the problem of spending very little on marketing which can be a shame when they provide a low cost route for stock market exposure by investors and have a number of advantages over open-ended funds and ETFs.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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