The Dundee-based firm, which in 2015 was embroiled in a bruising tussle with activist shareholder Elliott Advisors culminating in the departure of its chief executive Katherine Garrett-Cox in March 2016, said in its half-year report released on July 22 that the net asset value total return of its trust was 6.6% during the period. Total shareholder return was 2.6%. Its benchmark, the MSCI ACWI, rose 12% during the period.
Chairman of Alliance Trust, Lord Smith of Kelvin, said: “Investment performance in the period underperformed the benchmark, reflecting the turbulent market conditions around the EU referendum when the trust’s equity portfolio gave up the outperformance it had recorded over the prior five months.”
The underperformance came despite the trust implementing two hedging positions before and after the referendum on June 23. It it took out a three-month sterling hedge in March to protect it from a potential fall in value of the currency. This has been rolled over for a further three months. The second hedge was a short position on the FTSE 100 to protect it from a collapse in markets, which was opened on June 24 and closed on July 1. However, the the hedging created an underperformance of 0.2%, the trust said.
Alliance Trust said the UK economy “appears set for at least a mild recession as investment and consumption freeze up in the midst of so much uncertainty”.
It added: “The question remains as to whether this will spill over into Europe and result in a slowdown across the global economy. The unprecedented nature of the current situation makes forecasting the impact particularly challenging.”
In 2015, Elliott Advisors demanded a boardroom overhaul at Alliance Trust, blaming high costs and poor performance.
Alliance Trust said expenses had fallen by over 30% to £7.7 million, compared with £11.1 million for the same period last year. It added that its board is now made up “solely” of non-executive directors, with independent boards in place for Alliance Trust Investments and Alliance Trust Savings.