Simon Elliott, head of research at Winterflood, says net asset value (NAV) has increased by just 66%, compared with 85% of the FTSE All Share index and 79% for the FTSE World ex-UK index.
He says: “Alliance Trust continues to disappoint. Investment performance is, at best, dull and, in our view, made less attractive by considerable style drift.
“This fund was once characterised by its conservative investment approach which protected shareholders’ funds in difficult markets.
“This is no longer true as evidenced by the fund’s struggles in the second half of last year while outperforming year‐to‐date. We believe that this is a function of the considerable change in investment personnel at Alliance over the last few years.”
The head of research says both Alliance Trust Savings and Alliance Trust Investments continue to lose money, having shelled out £50m and £10m, respectively, in accumulated losses. (article continues below)
Elliott says he regards the loss-making subsidiaries as a “jam tomorrow story”, adding that investors would have to make “herculean assumptions before it starts to make a meaningful contribution to the fund’s income account or NAV”.
In a similar vein, though Alliance Trust Investments permits the recruitment of new investment managers with the promise of seeding funds, “it would need to grow 20x before being profitable”, says Elliott.
He adds: “When the buyback policy was introduced last year the stated intention was to move the fund’s discount in line with its peers.
“However the intention now appears to be more focused on reducing discount volatility. Consequently, it would appear that the chances of the discount narrowing materially from here are slim.
“Against this backdrop we would suggest that shareholders take advantage of the buyback policy, while it lasts, to make a hasty exit. There are other, far more attractive, investment trusts available.”