Alliance Trust increases dividend but falls behind benchmark

Lord Smith of Kelvin

The platform, which has undergone a major management and structural overhaul in recent years, saw a negative equity portfolio return for the year of 4.1 per cent, under-performing against its benchmark index, the MSCI All Country World Index, which made a negative return of 3.3 per cent.

The trust’s net asset value negative return was 5.4 per cent, swinging from a total return of 18.55 per cent the year before, and the negative shareholder return for the year was 6.1 per cent.

Net asset value per share as at December 31 was 723.6 pence, down 7.0 per cent from 777.7p on the same date in 2017.

Alliance Trust’s share price at the end of 2018 was 688.0p, reflecting a discount to net asset value of 4.9 per cent, widened from 4.0 per cent.

Shares in Alliance Trust were up 0.4 per cent on the day Friday at 739.00 pence, having improved since the year-end.

Alliance Trust declared a final dividend of 3.389 pence per share, taking the total payout to 13.55p, up 3.0 per cent from 13.16p for 2017.

The trust said that 2018 was a challenging year for investment managers, due to only very large cap growth generating significantly positive returns, as a result of economic growth being halted by monetary tightening by various central banks as well as trade tensions between the US and China.

Large cap stocks within Alliance Trust’s portfolio stood out as outperformers during the year, whole assets statistically cheap in earnings were the main detractors.

The trust also said that fierce competition among platforms, as well as the cost of maintaining the right technology, were some of the factors that led the board to sell its Alliance Trust Savings business last year.

Direct to consumer platform Interactive Investor bought ATS and its Dundee office space for £40m in October.

Lord Smith of Kelvin, Chairman of Alliance Trust PLC said: “2018 was a challenging year for global equities with most markets falling and many active managers struggling to outperform. Like others, we trailed our benchmark, partly due to market returns during much of the year having been driven by a narrow group of very large companies.

“Our strategy of appointing a number of managers with different styles and approaches to select their best stocks means we will never have a very concentrated exposure to one segment of the market. By investing more broadly across companies, countries and sectors, we should avoid the short-term performance highs and lows driven by particular market factors. In the long run, though, we expect our portfolio to outperform the market.

“Meanwhile, we continued to provide investors with income by increasing our dividend, which has now risen every year for 52 consecutive years.

“During the year, we made further progress towards simplifying our business by disposing of many of our remaining non-core investments, and we are in the process of selling, subject to regulatory approval, our subsidiary, Alliance Trust Savings, to Interactive Investor Limited. The rationalisation of our holdings will enable us to focus on global equities which at year-end represented over 97 per cent of our assets. We are clear on the direction of the Trust and that it will continue to prove a wise choice as a core investment for the long term”

Chair Robert Smith, in his statement accompanying the results, looked ahead to the possible implications of Brexit for the trust.

“I cannot end my statement without reference to Brexit”, he said. “We have considered the implication for the Trust and we have in place a contingency plan to change our Irish Alternative Investment Fund Manager, if required. We do not consider that Brexit, regardless of how it finally materialises, will have a significant impact on the operation of the trust.”

Mr Smith added: “Despite the political uncertainties, we are clear on the direction of the Trust and that it will continue to prove a wise choice as a core investment for the long term.”